MNI NORGES WATCH: Likely To Hold, With Little Cut Timing Steer

Norges Bank is expected to leave policy on hold at its November meeting having delivered what was widely described as a "hawkish cut' in September, when it lowered the policy rate by 25 basis points to 4.0% but published a rate path and commentary for only one cut per year over the coming three years.

September’s rate path, which will not be updated until December, was higher than its predecessor and left analysts debating when the next cut would come, but Governor Ida Wolden Bache is unlikely to give any precise steer on timing when the decision is announced on Thursday.

The shallow path pointed towards the second half of next year, but some analysts predict that the move could come much earlier.

Norges Bank’s approach now is to avoid offering meeting specific policy guidance, after it came in for criticism for clearly guiding towards a March cut which did not materialise. September’s cut was not fully priced, with investors unsure whether the Riksbank might not weight until December. November’s meeting was never in play, as it provides no new forecast round. 

"We are conscious that giving very precise signals about what to do at the next meeting can be given too large weight, and to a large extent have been interpreted as a promise," Wolden Bache said in an interview with MNI after the September meeting. (See MNI INTERVIEW: Norges Bank Head Tilts Against Precise Guidance)

Data and events since September have not pointed to the need for any comprehensive rethink of Norges Bank's assessment. While the target core inflation measure CPI-ATE dipped 0.1 percentage point to 3.0% on the year in September,  0.2 points below Norges Bank’s forecast, the government’s 2026 budget unveiled this month showed more fiscal stimulus coming down the tracks. There were tax cuts on income and consumption and at 2.8% of the sovereign wealth fund (GPFG) the structural oil deficit is near the fiscal rule's maximum allowed withdrawal of 3%.