November 27, 2022

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Rising rates do not alter interest rate expectations - E24

Rising rates do not alter interest rate expectations – E24

Nordea, Danske Bank and Handelsbanken markets are quietly sitting in the boat, not making any changes to their forecasts. However, DNB is making a complete makeover.

Kjetil Olsen of Nordea Markets expects a 0.25 percentage point rate increase in November.
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On Monday morning, inflation figures for September were released. It was higher than expected.

Statistics Norway measured the Consumer Price Index (CPI) to be 6.9 percent in September this year compared to the same time last year. Core inflation (CPI-JAE) was measured at 5.3 percent year on year.

It’s surprisingly loud, said Marius Hof of Handelsbanken.

It stuck to its forecast for a 0.25 percentage point increase in November. But he says the probability of a 0.5 percentage point increase has increased.

DNB Markets, represented by Kjersti Haugland, said after the inflation figure became known, they still believed in a 0.25 percentage point increase in November. However, the brokerage firm turned around on Monday evening, writing in a forecast report that it expects a double-digit rate hike of 0.5 percentage point.

– High inflation increases the risk that the Bank of Norway will raise interest rates more than expected, according to expectations.

Read on E24 +

It’s uncomfortable to say you don’t know

Sit quietly in the boat

Nordea Markets and Danske Bank are not making any changes to their forecasts after the latest inflation numbers. Both banks anticipate a 0.25 percentage point rate hike in November. Danske Bank said earlier that it does not expect an interest rate increase in December.

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Today’s numbers increase the chance of a new 25 basis points in December, says Frank Gollum, chief economist at Danske Bank.

Read on E24 +

Vidom says it reduces price pressure. He does not.

For his part, Nordea Markets Chief Economist Kjetil Olsen is keeping the door open for Norges Bank to raise interest rates by more than 0.25 percentage point.

— Today’s inflation numbers increase the likelihood of it progressing faster, up 0.5 percentage point in either November or December, he says.

The increase in inflation was 0.3 percentage point higher than the Bank had projected.

– I don’t think it is enough to increase 0.5 percentage points, but it is a difficult decision. I think Norges Bank is a bit unsure, and they want more evidence that the Norwegian economy is doing better, he says.

If Norges Bank is in a hurry, and the Norwegian economy is doing better than expected, it instead believes in an interest rate hike in December.

He says it is only a matter of time before growth in the Norwegian economy slows.

– We are at a turning point, he says.

Read also

Jumps in inflation increase the risk of a new “double” rate hike