As expected, Norges Bank (NB) left the sight deposit rate unchanged at 0.50% this morning . The Board maintained the neutral bias formally introduced in the statement in September 2016, and reiterated that the 'current assessment of the outlook and the balance of risks suggests that the key policy rate will remain at today's level in the period ahead'. The decision was unanimous.
The upward revision of the rate path published in the Monetary Policy Report (MPR) was a small surprise. However, we do not see it as a game changer for our EUR/NOK range call. For FI/rates, we reiterate our strategy of a FRA Fly and NOK IRS 5Y/5Y versus EUR.
Taking our own estimates into account, we still expect NB to hike rates towards the end of 2018. Market pricing is now fully aligned with this view, with the first hike fully priced in around end-November 2018.
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