This week’s event at home is undoubtedly the government yield message on Thursday, writes chief economist Kjetil Olsen in Monday’s morning report from Nordea Markets.
“Not only will they cut interest rates by 1/4 percentage point to 0.50 percent, the new interest rate path will include a small probability that the policy rate is down to 0,” the report said.
According to Olsen has virtually all of the news coming in on the downside since December:
“the Norwegian economy is lower interest rates abroad are lower, money market premiums is higher, the forward price of oil is lower and oil companies have announced even bigger declines in oil investments than previously thought. Besides pointing signals from this year’s wage to lower wage growth than Norges Bank projected, “writes Chief Economist continues:
” Although the news since the last overall really should push the interest rate path considerably down towards zero, is likely to Norges Bank being a little reticent. They’re not going to acknowledge the argument to keep powder dry, but we think they basically know that the direction of interest rates is more important than the level to hold krona weak. Roller-coaster ride to EUR on Thursday, where Draghi stated that the floor rate can be achieved, was a reminder in this respect. “
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