Norwegian Krone: Softer inflation clouds September hike odds – Danske Bank

Danske Research Team reports that Norwegian core inflation rose to 3.0% year-on-year in August, below Norges Bank’s June projection of 3.3%. This points to a lower rate path, cutting implied future hikes, while weaker growth and a stronger Norwegian Krone contrast with higher global rate expectations. The bank now sees the September decision as a close call and expects Norges Bank to stay on hold.

Lower core CPI tempers hike path

"In Norway, core inflation rose to 3.0% y/y in August close to our expectation of 3.1% (Cons.: 3.0% Prior: 2.7%). This is well below Norges Bank's estimate from the June MPR at 3.3%. In isolation, this suggests a lower rate path, moving from signalling around 1.5 further hikes to roughly 0.5 hike."

"Other factors are mixed: growth is weaker and NOK is stronger, but global rate expectations are higher. Overall, the September rate decision looks like a close call."

"Unless the regional survey on 17 September surprises to the upside, market pricing ahead of the meeting may be decisive. The probability of a September hike fell on this datapoint."

"Following the lower-than-expected Norwegian inflation print yesterday, we now expect Norges Bank to stay on hold in September."

"Despite the sharply higher oil price, EUR/NOK climbed higher towards 10.80 and the recent NOK rally increasingly looks exhausted."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)