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Norway Policy Rate 4.5% (consensus 4.5%) in May-24

• The Norges Bank has maintained the policy rate at 4.5%, aligning with expectations and previous forecasts, to control inflation that is still markedly above the 2% target despite a gradual slowdown.
• Economic activity in Norway is slightly better than expected, with resilient employment but continued low growth. Rising international policy expectations and a weaker krone complicate future monetary policy decisions.
• The Committee is prepared to adjust the policy rate up or down, depending on forthcoming economic data, focusing on inflation trends and economic growth rates.

Hedge in May and Go Away

• A sharp rise in market rates drove down equity prices in April. The correlated move was consistent with our suggestion before Easter to hedge the downside with equity options.
• We now believe the front end is broadly flat enough, so we have turned neutral on rates relative to the market despite being more hawkish than the consensus on the BoE.
• The potential for market expectations to overshoot again, extending the bearish trends, means hedging with options may still appeal over selling or hoping for recovery.

By Philip Rush

US Policy Rate 5.5% (consensus 5.5%) in May-24

• The FOMC unsurprisingly held the federal funds rate steady at 5.25-5.5%, reflecting ongoing economic strength paired with higher-than-expected inflation, complicating efforts to reach the 2% inflation target.
• The Committee also decided to slow the pace of its securities holdings reduction, a strategic move aimed at mitigating market stress and aligning with broader economic stability.
• The FOMC emphasizes its commitment to a data-driven approach, indicating that future interest rate decisions will closely depend on inflation trends and economic data. It maintains readiness to adjust policy as needed to balance growth and price stability.

Colombia Policy Interest Rate 11.75% (consensus 11.75%) in Apr-24

• The Banco de la República Colombia’s unsurprising decision to reduce the policy interest rate by 50 basis points to 11.75% aims to bolster economic growth against a backdrop of declining inflation, with the central bank maintaining a careful balance to avoid overheating the economy.
• Updated economic projections suggest a recovery, albeit juxtaposed with a concerning uptick in unemployment rates, presenting a challenge for ongoing monetary policy adjustments.
• External economic pressures, particularly from US policy shifts and global financial market trends, remain pivotal in shaping the future trajectory of Colombia’s monetary policy, emphasizing the importance of adaptive strategies to navigate international uncertainties.