"Финансова къща Логос-ТМ" АД

Norges Bank Preview - Unchanged Rates And Neutral Bias Maintained


We expect Norges Bank (NB) to keep the sight deposit rate unchanged at 0.50% at Thursday's meeting and over the next 12M.

Economic data have on balance disappointed over the last months but given the Regional Network Survey, labour market status, higher foreign rates, the oil price rise and not least the housing market situation we do not think NB sees a need to signal further monetary stimuli. Hence we expect NB to reiterate a 'neutral' bias.

While developments since September from a historical perspective suggest a downwards revision to the rate path we think NB will counter the seeming discrepancy between the rate path and the official bias by introducing a 'smoothing' of the rate path and/or an explicit reference to the housing market.

Markets are pricing-in close to a zero percent probability of a rate cut on Thursday and a roughly 30-50% probability of a rate hike over the next 12M.

We see risks skewed towards a dovish surprise on Thursday and from a risk/reward perspective see value in selling the front-FRAs. Alternatively, consider positioning for a steeper NOK-curve relative to peers as a reflation hedge.

Strategically we like being short EUR/NOK, but regard year-end seasonality and the balance of risk as possible headwinds.