When we get the next rate cut? Experts disagree – OBI Online

Figures SSB released earlier today showed that core inflation (CPI-ATE), consumer price index adjusted for tax changes and excluding energy products, rose 2.6 percent on an annual basis in July.

This was in line with consensus, but down from very high 3.2 percent annually in June.

2.6 percent annual rise in core inflation is still far above Norges Bank’s estimated 2.2 percent for July.

– Our first impression is that core inflation will be 0.3-0.4 percent above the central bank’s estimates also next month. The big question is how this will affect the interest rate decision in September.

– Norges Bank has recently placed much less emphasis on current inflation when setting interest rates. With a weak economy and many reasons to believe in lower inflation in the longer term, we do not believe the central bank will make too much out of this at the September meeting, writes senior economist Erik Bruce at Nordea Markets in a note.

Trio eyes Sept. cuts
The brokerage admits that uncertainty has increased, but still believe a rate cut in September.

The same Handelsbanken Capital Markets, referring to “significantly weaker outlook” for the Norwegian economy.

Senior Economist Marius Gonsholt Hov notes that both domestic and imported inflation fell from June to July.

– Currency movements through the past year points toward limited opportunities for the imported inflation rises much ahead, he writes in an update.

Chief Economist Shakeb Syed SpareBank 1 Markets eyes still a September cut, and believe Norges Bank will focus on the inflation is in a downward trend.

Chief Economist Elisabeth Holvik in Sparebank 1 Gruppen also believe a rate cut from Norges Bank in September, according to a monthly report as well to note was written before today’s CPI figures.

Strengthened by faith in November
DNB Markets, however, still believe that the central bank waits until November to lower interest rates.

The brokerage notes that the first and primarily imported inflation that is higher than Norges Bank’s projections – due to a marked weakening is likely.

– This, together with a weaker krone development than Norges Bank projected in June, helping to strengthen our view that the next rate cut coming in November rather than in September.

– At the policy rate is further down, despite inflation on target, because monetary policy is forward looking. At two and three years ahead is the clear prospect of inflation will fall below the target, writes senior economists Kjersti Haugland and Kyrre Aamdal.

Chief Economist Erlend Lødemel in Arctic Securities printer according to TDN Finans that inflation figures are an argument against a rate cut and estimates the chances of a September cut to 50/50.