Øystein Olsen, Governor of the Central Bank of Norway. Image via Norges Bank. Foto: Jørgen Kvam
Further Rate Cuts Unlikely
At their September meeting, Norges Bank signalled that further rate cuts were unlikely to materialise and the deposit rate would instead remain close to 0.5% over the coming years. This forecast was largely fuelled by the mainland’s (ex-oil) recovery and concerns linked to financial stability, particularly regarding the housing market.
However, the central bank does continue to see a subdued environment for growth in the total economy, having downgraded their growth and inflation forecasts at the December meeting. This pessimism has likely peaked now, and with data sets highlighting improvement and positive momentum in the economy, there are risks of an upward revision to forecasts over 2017.
Oil Exports Increase + 80%
Norwegian Oil exports have significantly increased over recent months and are now up over 80% year on year. Consequently, and as a result of the rise of oil prices, the Norwegian trade balance has significantly improved following a slump since the oil price decline worsened in 2014.
Norwegian oil production has also increased, in volume terms, and there is scope for further improvement of the basic balance due to portfolio inflows driven by higher oil prices. Safe-haven flows fuelled by the upcoming election risks in the Eurozone could also spark an acceleration of inflows. Â With these elements in mind, the Norwegian flow picture continues to look promising and should provide further support for NOK.
(Click on image to enlarge)
Image via Crude Oil Peak
Norwegian oil production has also increased, in volume terms, and there is scope for further improvement of the basic balance due to portfolio inflows driven by higher oil prices. Safe-haven flows fuelled by the upcoming election risks in the Eurozone could also spark an acceleration of inflows. With these elements in mind, the Norwegian flow picture continues to look promising and should provide further support for NOK.
