NORGES BANK: Some Marginally Hawkish Inflation Commentary In Communications

Norges Bank retains its cautious stance. We think some of the commentary around inflation is slightly hawkish on the margin, but this should be viewed in the context of the cautious September MPR rate path. 

• 2-year NOK swap rates have risen around 1bp since the decision was published, now up 2bps of the session at 4.01% (Bloomberg Finance L.P data).
• Similarly, NOK has strengthened marginally versus the EUR and SEK. However, it’s difficult to gauge whether this is in reaction to the statement/assessment, the latest bid in Brent crude futures, or the broader dollar/UST yield pullback following the early Challenger job cut release. 

Some highlights from the Committee’s Assessment:

• Acknowledging the lower-than-expected September inflation reading, but it seems there is a strong preference to avoid reading too much into one data point: “The strong growth in business costs in recent years will likely restrain disinflation ahead, but lower wage growth is expected to push down inflation further out. The Committee noted that more information about price developments and the drivers of inflation going forward will become available in the period to the next monetary policy meeting.”
• Noting recent signs of softness in the labour market, albeit caveated by resilient labour demand signals: "Since the previous Report, registered unemployment has been a little higher than expected. Registered unemployment rose to 2.2 percent in October. …. Preliminary figures for the number of salaried employees may indicate that employment was somewhat lower in the third quarter than projected. At the same time, the number of job vacancies indicates sustained demand for labour".
• The rest of the Committee’s Assessment re-iterates the policy statement messages. Commentary around the development of oil prices, the exchange rate, fiscal policy and the money market premium were as expected.

Governor Wolden Bache will deliver a press conference at 0900GMT. She doesn’t usually give much away, particularly at interim meetings.