NORGES BANK: Bache Highlights Lower Inflation, Higher Unemployment
Jun-19 08:38
Norges Bank press conference has started. Initial highlights from Governor Wolden Bache's speech
- "In March, when we last presented forecasts, we signalled that the policy rate would most likely be reduced in the course of 2025. Since that time, inflation has slowed, and excluding energy prices, inflation has been lower than expected. At the same time, the inflation outlook for the coming year indicates that inflation will be lower than projected in March".
- "The Committee judges that a cautious normalisation of the policy rate will pave the way for inflation to return to target without restricting the economy more than necessary".
- "The policy rate forecast presented is little changed compared with the policy rate path in March but is a little lower in the near term and a little higher further out".
- "The military strikes in the Middle East the past week and significant changes in US policy have intensified the uncertainty surrounding the outlook. Higher tariff rates have weakened the economic growth outlook for our main trading partners. The effect of higher tariffs on economic growth in Norway appears to be limited. Norges Bank’s Regional Network contacts report increased uncertainty owing to the trade conflicts, but only a few expect that to have a large impact on activity ahead".
- "Activity in the Norwegian economy appears to be holding up well"...."Since March, unemployment has increased a bit more and been slightly higher than we had envisaged. This may indicate that there is a little more spare capacity in the economy than we assumed in March".
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OPTIONS: Larger FX Option Pipeline
May-20 08:31
- EUR/USD: May21 $1.1140-50(E1.3bln), $1.1250(E1.1bln), $1.1390-05(E2.1bln); May22 $1.1175(E1.9bln); May23 $1.1145-50(E1.1bln), $1.1180-85(E1.1bln), $1.1300(E1.0bln), $1.1330-50(E1.3bln), $1.1400(E1.1bln)
- USD/JPY: May23 Y144.00($1.4bln), Y145.00($1.9bln)
- GBP/USD: May22 $1.3260-70(Gbp1.5bln)
- USD/CAD: May22 C$1.4050($1.3bln); May23 C$1.4000-15($1.2bln)
GILT SYNDICATION: 5.375% Jan-56 gilt: Update
May-20 08:30
- Guidance unchanged: 4.25% Dec-55 gilt (GB00BT7J0241) + 1.75bp/2.25bp
- Size: GBP benchmark (MNI expects GBP5.5-8.5bln)
- Books in excess of GBP57bln (inc JLM interest of GBP3.75bln)
- ISIN: GB00BT7J0241
- JLMs: BNP Paribas, BofA Securities, Deutsche Bank, Goldman Sachs International Bank (B&D / DM) and Santander
- Settlement: 21 May 2025 (T+1)
- Maturity: 31 January 2056
- Coupon: 5.375%. Short first
- Timing: Books open, today's business (MNI expects books to close at 10:00BST)
From market source / MNI colour
BOE: Summary of Pill's opening remarks
May-20 08:30
- He sees May as a skip, but seems to still broadly support quarterly cuts.
- He thinks that the MPC started cutting too early - remember that he voted against the first cut in August 2024 (along with Mann, Greene and Haskel). He partly sees as his vote for a skip to make up for that.
- He again used the word "cautious" rather than "careful". This has become a buzzword with the MPC and is a stronger word than "careful".
- He still believes that disinflation is in process, but that there has been greater intrinsic inflation persistence - and this has changed the character of disinflation.
- He notes that the MPC has consistently underestimated inflation persistence, wage growth and the inflationary cost push shocks.
- He doesn't think there has been enough data yet to assess whether there has been a structural break in inflation persistence.
