- Fully possible that Norges Bank must started QE – HegnarOnline

Analysts at Handelsbanken Capital Markets has previously been out and called the interest rate path Norges Bank “not credible.”

When Olsen & amp; Co. gave both the currency market and analyst ranks a solid rate shock in March, economists Handelsbanken swiftly out to remind you that it is better to be safe than sorry.

– Just look to Sweden, where the Riksbank fighting with backs against the wall and trying to rectify past mistakes right. As we see it, is not this the interest rate path is not credible, said broker house analyst team at the time.

We’ve got a few Norwegian macroeconomic figures since March. On the one hand, the krone has been somewhat lower than Norges Bank has assumed, but in the daily fresh report from Handelsbanken, says analyst team that just about all other factors imply a lower interest rate. Thus, the technically more than a 50 percent probability of a cut in May.

In the economic report from Handelsbanken writes senior economist Kari Due-Andresen that she agrees with Norges Bank that buildup financial imbalances must be taken into account and acted upon. But rather than using an imprecise weapon that monetary policy is, she believes it is better to make use of available targeted measures adequacy and liquidity requirements.

– If Norges Bank keeps interest rates too high and being forced to act at a later date, interest weapon quickly become exhausted. Although the policy rate in Norway at 1.25 percent is significantly higher than in neighboring countries and major trading partners, it is not very far down to clean the floor, she says, adding that she sees it as quite possible that Norges Bank may have to resort to other measures, such as the Fed, Bank of England, the ECB and the Riksbank has had to do.

Purchase of government bonds will then have a limited effect, she believes, in that it concerns a small market.

– Next resort may be currency intervention to try to weaken the krone. Such as the Swiss central bank, Norges Bank will eventually be forced into a situation where the krone again becomes a target, not only implicitly, but explicitly. To set a goal for the krone can be risky and invite speculation, but may also be the only way to get enough support for monetary policy.

The Swiss central bank had known enter their exchange rate target, which resulted in a chaos must return to fixed exchange the collapse to find similar examples.

– The problems of both the Swedish and Swiss central bank underlines the major challenges Norges Bank may get to meet, says Due-Andresen.

Handelsbanken Capital Markets expects the policy rate will remain unchanged at 0.75 percent out 2018, but sees a significant downside risks to this forecast.