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Norges Bank gives its policy decision on Wednesday and uncertainty about the outcome may offer krone (NKr) trading opportunities.
At the end of last week, market consensus was for Norway’s interest rates to stay at 1.5 per cent, and Citi was speculating that a weak krone might mean the “Norges Bank could maintain its view that its next move would be a rate hike”.
But even before Oslo’s finance ministry on Tuesday trimmed 2013 economic growth forecasts from 2.5 per cent to 1.4 per cent, some analysts were warning the NB might ease its rates.
Strategists at Barclays saw the possibility of a 25 basis point cut, noting: “The moderation in wage growth . . . increases the risk that inflation will continue to undershoot the target (2.5 per cent) for an unwarranted period of time.”
“If we are wrong on the timing [of] a softer NB, policy guidance will nevertheless likely nourish expectations of a cut at the June 20 meeting,” it said.
Citi, too, is now less hawkish but warns: “Should the Norges Bank fail to back up [governor Øystein] Olsen’s more dovish rhetoric . . . NKr could pull back some of its losses of late.”
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