Norges Bank: Disinflation slows rate path – Nomura

Nomura economists have observed that Norges Bank maintained its policy rate at 4.25% in August, despite a softer CPI-ATE inflation figure. The central bank has indicated a potential further rate increase, but now expects a possible hike in November, with risks leaning towards no additional rate hikes and no cuts projected until September 2027.

Despite the unexpected slowdown in underlying inflation, the Governor's guidance remains uncertain, stating that "it is too early to conclude that the inflation outlook has changed materially." This suggests that policymakers might still consider raising the policy rate. The June meeting's projections suggested a 50% chance of a rate hike in August, with rates potentially peaking at 4.55% in Q4 2026, and even hinting at a third hike this year.

The forecast for CPI-ATE inflation is expected to be slower than Norges Bank's prediction for the remainder of the year and in 2027. However, the bank still anticipates a rate increase, with an average of 2.9% year-over-year in H2 2026. The November meeting's forecast for the second rate hike this year is now considered less likely, but still the most probable scenario unless future inflation data boosts policymakers' confidence in disinflation.