Norwegian Krone: Norges Bank softens hawkish stance – TD Securities
TD Securities’ Norges Bank analysis notes the policy rate was left unchanged at 4.25% in August, with a less hawkish tone than in June.
TD Securities' analysis of Norway's central bank suggests the Norges Bank has softened its hawkish stance on interest rates. In August, the policy rate remained unchanged at 4.25%, with a less aggressive tone than in June. Softer-than-expected inflation, with the underlying Consumer Price Index (CPI) slowing to 2.7% year-on-year, reduced the need for further rate hikes.
This shift in guidance has moved from expecting a hike to one that may be needed. TD Securities has removed its forecast for a September rate increase, now expecting the policy rate to stay at the current 4.25% level for a longer period. While policymakers remain cautious about inflation, they acknowledge that the burden of proof for another hike has increased since June.
Should geopolitical developments in the Middle East persist and oil prices rise into the autumn, there may be a return to the optionality for an additional rate hike. However, this scenario is no longer considered the bank's base case.
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