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Dovish shift from Norges Bank threatens NOK appeal, Societe Generale warns

Norges Bank kept its policy rate at 4.25% and removed explicit near term meeting guidance for another hike, with forecasts due in September.

Reported · Written up by our desk · Central Banks

Societe Generale says Norway’s central bank, Norges Bank, held its policy rate at 4.25% and softened its hawkish tone, a combination that could weigh on investor appeal for the Norwegian krone.

The bank still expects one more rate increase, but it dropped explicit guidance for a hike at one of the forthcoming monetary policy meetings, replacing it with wording that it may still become necessary to raise the policy rate.

Societe Generale also pointed to slower inflation this summer, noting it was lower than Norges Bank had projected, even as the central bank still judges inflation to be too high and too early to say the outlook has materially changed.

With new forecasts scheduled for September, the note warns that a more dovish turn could reduce the krone’s attractiveness for investors.

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