As expected, Norges Bank kept its 1.5% rate unchanged. The central bank signaled at its September meeting plans to stay put in the foreseeable future. USDNOK has moved around 0.4% higher following the announcement.
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“The underlying inflation has been as projected. Uncertainty about international developments continues, and interest rates abroad are very low. At the same time, the weak krone may lead to higher inflation in the future,” says Norges Bank in a statement.
Having hiked rates three times so far in 2019, the Norges Bank has kept its promise from the September meeting to stay put for the next couple of years. Three hikes reflected the hawkish stance of the Norges Bank on the back of the recovery in global oil prices, which has seen energy services, and investment in equipment, increase.
“A weaker currency means a higher interest rate projection, while lower oil prices are assumed to reduce economic growth and therefore pull down on the rate forecast,” ING bank said in a note.
Still, many bank analysts see more downside risks for NOK, which has been weaker than expected in the previous weeks. This month, the USDNOK hit the 18-year high of 9.2107, which will now continue to act as a strong resistance in the weeks and months to come.
“With global growth slowing, the low-liquidity NOK remains vulnerable,” ING said.
The first major support is located just below the 9.05 handle in the context of the horizontal support. As the USDNOK is moving higher following the Norges Bank statement, the mini-trend line connecting two recent higher lows comes at 9.1850.