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Norwegian krone set to track Norges Bank as inflation data muddles outlook

Commerzbank says the softer June headline and core inflation makes an August hike slightly less likely, though a move in September remains possible.

Reported · Written up by our desk · Central Banks

Commerzbank analyst Antje Praefcke said recent uncertainty around Norway’s inflation releases has clouded the near term interest rate path, leaving the Norwegian krone (NOK) largely calm despite shifting expectations for Norges Bank. Praefcke noted that Norges Bank left its policy rate unchanged at 4.25% but kept a slightly higher probability of another hike later this year because inflation remains too high and could become more persistent without additional tightening. She said the bank’s forecast was nudged above its prior March guidance, placing the policy rate at just over 4.5% by year end.

The analyst attributed part of the confusion to delayed data and also pointed to unexpectedly softer June figures for both headline and core inflation. While she said an August hike has become slightly less likely, it is not ruled out, with Norges Bank potentially waiting for further data before acting.

Praefcke added that for now the NOK’s stability is being supported by higher oil prices, even if the currency showed only a brief reaction to the inflation-related news. She said Norges Bank is unlikely to surprise markets with a dovish shift at its August meeting.

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