NORGES BANK: MNI Norges Bank Review: Jan '26 - “Special Attention” On Inflation

The Richmond Fed manufacturing index saw a relative improvement in December as it bucked the trend from three other regional Fed surveys which had all deteriorated. A sideways and noisy recent pattern makes it hard to get a sense of trend in current activity although six-month ahead expectations of local business conditions saw a solid improvement after prior increases in new orders and shipments. 

• The Richmond Fed manufacturing index fared a little better than expected in December, rising to -7 (Bloomberg cons -10) after -15.
• It broadly continued a recent run of oscillating between -4 and -20 in 2H25 in patterns that have largely been seen in new orders albeit with some greater volatility (latest -8 after -22).
• Six-month ahead expectations of local business conditions offered a stronger take though, rising to 16 after the 1 in November was its first positive since February.
• This improvement follows a previous increase for new orders (27 after 26 in Nov and 12 in Oct) and shipments (28 and 25 in Nov and 13 in Oct) which was largely cemented this month, although the number of employees index also saw a reasonable increase this month (8 after -1 in Nov and 2 in Oct).
• Back to current indicators, the sequential increase goes against deterioration seen in the other regional Fed surveys with Empire at -3.9 after 18.7, Philly at -10.2 after -1.7 and Kansas at 1 after 8.
• The average of these four regional Fed surveys fell to -5.0 in Dec from 2.5 for its lowest since June, pointing to downside momentum risk to ISM manufacturing (released Jan 5). We’ll revert on the latest for manufacturing indicators after Dallas (Dec 29) and the MNI Chicago PMI (Dec 30). 

• RES 4: 113-09   76.4% retracement of the Nov 25 - Dec 10 bear leg
• RES 3: 113-07   High Dec 3
• RES 2: 112-31/113-00+ High Dec 18 / 61.8% of Nov 25 - Dec 10 leg 
• RES 1: 112-21+ 50-day EMA
• PRICE:‌‌ 112-07 @ 15:57 GMT Dec 23
• SUP 1: 112-01+/111-29 Low Dec 23 / 10 and the bear trigger
• SUP 2: 111-19   1.236 proj of the Oct 17 - Nov 5 - 25 price swing
• SUP 3: 111-11   1.382 proj of the Oct 17 - Nov 5 - 25 price swing 
• SUP 4: 111-00   Round number support 

Treasuries fell sharply on the back of the stronger-than-expected US GDP print, opening a sizeable gap with key short-term resistance into 112-31, the Dec 18 high. Renewed weakness here would refocus attention on 111-29, the Dec 10 low and a key short-term support. A breach of this support resumes the bear cycle that started Oct 17. Instead, clearance higher would signal scope for a stronger corrective phase and open 113-00 initially, a Fibonacci retracement point. 

The Senate passed the 2026 budget bill earlier today by a margin of 110 in favour to 66 opposed, which followed a confidence vote that the gov't won by 113 to 70 votes. The legislation still needs to be approved by the Chamber of Deputies (to take place next week) before it can be ratified by year-end, avoiding automatic curbs on the levying of taxes and gov't spending. While PM Giorgia Meloni's conservative coalition gov't holds majorities in both chambers of the Italian Parliament, the 2026 budget has not been a smooth process. 

• La Repubblica: "The budget is worth "around €22 billion," Economy Minister Giancarlo Giorgetti said in a statement to reporters in the Senate. The total amount, initially €18.7 billion, "has increased," the minister explained, "because with the latest major amendment, we've supplemented the allocations for Transition 5.0, the Economic Zone (ZES), and price adjustments.""
• Last week, MNI's Policy team reported on the prospect of an additional EUR3.5bln in gov't spending to support businesses (MNI: Italy To Increase Funds For Investment In Budget Update).
• Local media reports suggest possible disagreement between Giorgetti and right-wing populist League group leader in the Senate, Massimiliano Romeo, in the aftermath of the vote. There has also been speculation of a falling out between the Economy Minister, who hails from the League, and party leader and Deputy PM Matteo Salvini, regarding changes to pension provisions.