Norwegian Krone: Policy rate seen on hold from Norges Bank – Nordea

Nordea economists Kjetil Olsen and Sara Midtgaard anticipate the Norges Bank policy rate to remain at 4.25% during their upcoming meeting. They note that June core inflation was significantly below the Bank's expectations and anticipate July data to continue being subdued. Unemployment and the Norwegian krone are both in line with forecasts, indicating no immediate need for a rate adjustment until further inflation evidence becomes available.

Based on current projections, Norges Bank is expected to leave the policy rate unchanged at 4.25% next week. This expectation arises due to inflation being well below Norges Bank's forecast, along with unemployment and the Norwegian krone aligning closely with June projections. Consequently, revised rate paths generated today could potentially be lower than those published in June.

Therefore, Norges Bank is anticipated to maintain the policy rate at its current level and await additional evidence on underlying inflationary pressures. However, there is still an expectation of further rate hikes this autumn. As a result, there is a strong likelihood that the disparity between actual inflation and Norges Bank's projected inflation path will significantly narrow following the August inflation release.