MNI Norges Bank Preview- Mar 25: Don’t Fully Rule Out The Cut

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Norges Preview - 2025-03.pdf

EXECUTIVE SUMMARY

• Norges Bank’s March decision is set to be a very close call between a 25bp cut to 4.25% and a hold at 4.50%. Of the analyst previews we have seen, seven expect a hold while five expect a 25bp cut.  Although the data since the January decision will contribute to hawkish revisions to the March MPR rate path, we still think markets are underpricing the implied probability of a cut.
• The prospect of anything other than a 25bp cut in March appeared highly unlikely just a few weeks ago. Both the September and December MPR rate paths essentially fully priced 25bps of easing in Q1, while the December and January policy statements included clear guidance for a cut at the upcoming meeting. However, the February headline and underlying inflation readings were much higher than expected. Taken alongside a lower-than-expected unemployment rate, consensus amongst markets and analysts shifted towards a March hold. 
• We have little reason to doubt the March MPR rate path will be revised higher, but there is some uncertainty around the magnitude. Of those who provide a view, analysts expect an upward revision of between 30-50bps. However, a more hawkish rate path doesn’t mean a March rate cut can be ruled out entirely. 
• Regardless of the policy decision, we don’t expect the March statement to contain clear forward guidance for the timing of the next/first rate cut.