This is the conclusion when E24 hear an uncertain analyst corps.
– There was a dramatic rate cuts, which almost nobody thought would come, says chief economist Erlend Lødemel Arctic Securities.
Norges Bank surprised namely economists in December, when Governor Øystein Olsen revealed that the central bank cut interest rates by 0.25 percentage points to 1.25 percent.
There was none of the hard data that has come from the Norwegian economy, indicating that the central bank should cut interest rates.
The backdrop though is that far from everything is rosy in the Norwegian economy; a powerful oil brake in the form of lower oil investments next year, and oil prices that have plummeted, has characterized the last half year.
The outcome of the next monetary policy meeting in March, seems to be highly insecure.
The central bank attitude change has led to wide divergences among economists. When E24 ask what they think Norges Bank will do with the policy rate ahead, waiting two of them clean cut, a waiting two interest rate cuts before the summer (one in March), one would think it goes against unchanged, while two have sat on the fence.
Fear powerful oil letdown
Earlier, Norges Bank has used hard numbers on developments to assess developments. It makes the central bank still, but now they have placed great emphasis on the possible negative effects that may come of oil brake.
– Norges Bank took down interest rates as a precautionary measure, and said that they would rather be safe than sorry, summarizes Erlend Lødemel Arctic Securities.
– This explanation is perhaps nothing wrong with, but the action still differs from the response pattern we have been accustomed to, he says.
– Norges Bank tend not to cut before it’s needed, but they did this time, says chief economist at Arctic.
He does not exclude that Norges Bank regret it surprisingly clean cut.
Lødemel think oil prices may remain low and perhaps even weaken further towards the next monetary policy meeting.
– I think monetary policy will bear the stamp of the stay ahead. Therefore, I believe Norges Bank cut interest rates on the grounds that they will be ahead, he says. That they had so busy cutting interest rates may also very well be interpreted as that they want a significant reduction in interest rates overall.
Oil brake must materialize
Chief Economist Harald Magnus Andreassen Swedbank believe Norges Bank cut again.
– For that to happen we must see that the slowdown in the oil sector will materialize and that it will follow the effects in the rest of the economy, says Andreassen to E24.
– So far there is limited signals about the past, but we think it will, says he said.
Two cuts
Erik Bruce, chief analyst in Nordea Markets, believe Norges Bank will ensure that it does not go wrong, and want to be ahead.
– Norges Bank has previously said that they hold back on rate cuts, partly justified by the danger that house prices will increase household debt growth, he says to E24.
– We expect that Norges Bank will continue to emphasize the downside risk of a hard downturn, he said.
Nordea waiting no less than two interest rate cuts from Norges Bank before the summer, one of them in March.
When the Executive Board of Norges Bank met to decide the policy rate in December, presented the central bank new projections for the Norwegian economy – estimates were relatively lowered substantially.
Norges Bank fresh estimate is however assuming an oil price of $ 70 a barrel (burnt spot). It is located at around 60 dollars a barrel, and Nordea expects oil prices will weaken further in the first half of next year.
This reinforces Nordea believe two interest rate cuts.
– On a knife edge
– The Norges Bank now wants to communicate, is that it is solely the numbers that determines whether there will be an interest rate cut in March, says chief economist Shakeb Syed Sparebank 1 Markets E24.
– There are much more data-dependent than before, and therefore balances meeting in March on a knife edge, he adds.
Syed says that central bank interest rate path from December, posted a 50 percent probability of rate cuts in March. He describes it as “special” that the central bank rate path looks the same probability of rate cuts as unchanged interest.
Often it is the difference between an unchanged interest rate and interest rate cut larger, such as the central bank sees a probability of 30 percent rate cut.
– Then you have to look more to arrive at what you think the central bank will do. Now one can only follow developments in the numbers and checking the weak or strong. And it important this time is that the numbers do not need to be much weaker or stronger that the central bank cuts or let be cut in March, he said.
Syed notes that Olsen during the press conference said that the interest rate cut is had advance that it was taken because we go weaker times ahead.
– If the numbers slightly weaker than expected, it cuts. They become stronger or as Norges Bank has set for itself, the key rate unchanged.
Too early to say
Handelsbanken was among the few who thought Norges Bank would cut interest rates now in December.
Now they are a little more hesitant:
Senior Economist Marius Gonsholt Hov seems basically it is too early to say whether Norges Bank will cut or keep interest rates steady in March. He thinks we have too little information to relate to the present time.
– What we have information on, is that the exchange rate is weaker than Norges Bank has set for itself. And it is then, in isolation, an argument that Norges Bank cut in March. So currently I hold a button that Norges Bank keeps interest rates steady, says, says Gonsholt Hov to E24.
– But there is much that can happen until March, he adds.
– Do not
– I’m in doubt, says chief economist Bjørn Roger Wilhelmsen macro fund Nordkinn Asset Management to E24.
– The options are clean cut or unchanged interest. But this depends on several criteria, he says to E24.
He believes Norges Bank will follow oil price developments very closely and believes this can be crucial.
– If the oil price falls to $ 50 a barrel, I think Norges Bank cut interest rates, says Wilhelmsen.
– Far away crisis
Governor Øystein Olsen stressed before Christmas that the Norwegian economy is in a crisis situation even though they cut the policy rate, and allows for the interest rates can be further reduced.
He stressed that although unemployment will rise slightly, the most Norwegians have economic well in 2015.
– We are far from a crisis, said Olsen E24 after the interest rate decision.
– There is no crisis we see in all. What we see is a fairly marked slowdown of growth that over a period has been very good. Now it’s a necessary restructuring to lower oil prices and to the fact that the peak of activity in the oil sector is passed, he continued.
– There is a risk that the downturn will be even more markedly than we envisage now. The risk we want to guard against. It is an important job for monetary policy. Therefore, we react.
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