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Norwegian krone outlook turns cautious as Norges Bank seen keeping rates

ING expects Norges Bank to hold its policy rate at 4.25% today, while it flags benign CPI-ATE prints as a potential shift toward a less hawkish tone, even as it keeps a EUR/NOK year-end target of 10.75.

Reported · Written up by our desk · Major Pairs

ING strategist Francesco Pesole said the Norwegian krone faces some downside risks around Norges Bank’s meeting, citing the potential for communication to turn slightly less hawkish if recent CPI-ATE data remain benign.

Pesole expects the central bank to keep rates at 4.25% today in line with expectations, and he still looks for another hike later this year, but he is less convinced the bank will deliver multiple additional moves.

He pointed to two CPI-ATE prints of 2.7% in June and July as factors that could tilt policymakers’ tone, while also arguing there is limited upside room for front-end NOK rates.

Despite the near-term risks, ING maintains a bullish view on NOK based on fundamentals and carry, keeping its 10.75 EUR/NOK target for the end of December.

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