Prisveksten: – Norges Bank har skiftet fot

Norges Bank has signaled it may raise interest rates further as inflation continues to exceed its target, according to the latest figures released on Thursday morning. The central bank's decision could be critical in determining whether it increases rates again in two weeks. Inflation remains a major concern for the bank, with many economists noting that the bank is now placing greater emphasis on inflation data compared to previous years.

DNB economist Kjersti Haugland says the shift in emphasis reflects a clearer distinction between the current situation and that of summer. She believes the bank is more concerned about the impact of prolonged inflation above its target on economic recovery. The current level of inflation is well above the bank's target of 2%, having remained high for several years, primarily due to energy price increases and tax adjustments.

The key issue for August and beyond is whether inflation stays below the bank's expectations or rises again to near its forecasts. SB1 Markets' rent and forex strategist, Dane Cekov, expects a significant gap if inflation exceeds this level, suggesting a rate cut could still be possible. Norges Bank's inflation target of 2% has been consistently missed, with actual figures reaching over three percent earlier this year.

The bank had previously indicated it would maintain the rate if inflation remained stable around 2.7% in June and July. However, if inflation surges back above the bank's target, a rate increase may be necessary. Haugland predicts a rate hike in August, with a potential reduction to 3.2% by then. This aligns with the bank's June projection, which anticipated a rate hike at the next meeting due to stronger inflation data.

While the bank initially delayed the rate hike in June due to lower inflation, it may now reconsider its stance. Haugland emphasizes that the bank's decision will depend on future inflation outlooks, which could still lead to a rate increase before the next meeting. She notes that if the hike does not occur, it could still happen later in the year, citing the possibility of a rate increase in September if inflation remains elevated.

The bank's economists suggest that if inflation remains high, it may be justified to raise rates further, even if it is not the final increase. Cekov points out that this mirrors the situation in December 2023, where the bank initially raised rates to 4.5% after a period of high inflation. Ultimately, the bank's response will be influenced by multiple factors beyond inflation, including employment data and economic temperature.

DNB economist Haugland notes that the bank has been overly cautious about the cooling effect of higher interest rates on the economy. The labor market remains strong, suggesting the economy has cooled more than the bank anticipated. She remains vigilant about inflation risks, acknowledging that Norges Bank has underestimated inflation's impact in the past.