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Central Bank Preview - Norges Bank, RBNZ & BoJ

October 26, 2009

Date / GMT		ACM	Consensus	Current Rate
28th / 13.00	Norges Bank Interest Rate Announcement	1.50%	1.50%	1.25%

	The Norges Bank rate decision is due to be announced on Wednesday at 13:00, with consensus looking for a 25bps rise to 1.5%. Rhetoric from central bankers has been explicitly hawkish in the last month, including Governor Gjedrem noting Norway rates were currently “extraordinarily low”. Since the last meeting on 23rd Sep, data releases have been almost universally stronger than forecasts; CPI rose 0.8% MoM in Sep, Unemployment ticked lower to 2.7% (from 3.0% prior), and latest Industrial Production figures for Aug indicated a rebound of 1.5% MoM. If forecasts materialize, Norway will become the second G10 country (and first in Europe) to begin monetary tightening since the financial crisis, and will ensure NOK continues to outperform in the coming year. We believe a significant amount of further tightening is already priced into NOK, so if the accompanying statement is not as hawkish as hoped (perhaps asserting a more gradual increase in rates) we would look to buy the dips.

28th / 20.00	RBNZ Interest Rate Announcement	2.50%	2.50%	2.50%

	We are in line with market consensus in expecting the RBNZ to hold rates at 2.50%. Officials have been very clear, including Prime Minister Key, that New Zealand is unlikely to face an upwards pressure on the cash rate until mid 2010. In addition, the strong NZD has been putting “enormous pressure” on domestic exporters, increasing the probability that any tightening is a long way off. In Key's own words "As long as the exchange rate stays high, it's not likely, I would have thought, that the Reserve Bank alters interest rates". For this meeting, the most we can expect is a slightly shift in tone of the accompanying statement to a more neutral policy stance. CPI rose 1.3% q/q in the September quarter, following increases of Q2 0.6% q/q and Q1 0.3% q/q and following a decrease of 0.5% q/q in the December 08. The latest figure outpaces the RBNZ own MPS forecast of 0.9% q/q and reinforces the removal of their easing bias. If the statements take a hawkish tone this should supportive for the NZD, to the dissatisfaction of central bank members.

30th / ---	BoJ Rate Announcement	0.10%	0.10%	0.10%

	It’s universally expected that the BoJ will hold rates steady at 0.10%. BoJ's Nishimura recently stated that loose monetary policy has to be maintained to support the domestic recovery, especially considering the downside risks to the economy are still elevated. In addition, he noted that the BoJ CP asset purchases corporate debt facility will be reviewed at this meeting, but despite its relatively small size we expect no changes until December, the earliest. With the JPY broadly weakening the probability of any comment regarding Yen strength has decreased considerably.

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