Norwegian Krone: Softer inflation trims hike odds – BBH
Brown Brothers Harriman's (BBH) Elias Haddad notes Norwegian Krone (NOK) underperformance after Norway’s mixed August Consumer Price Index (CPI) data reduced the perceived likelihood of a near-term Norges Bank hike, with September odds falling from 65% to 38%.
Elias Haddad from Brown Brothers Harriman (BBH) points out that Norway's krone (NOK) has been underperforming due to Norway's mixed August Consumer Price Index (CPI) data. This has decreased the probability of a near-term Norges Bank interest rate hike, with September odds dropping from 65% to 38%. Despite inflation remaining above the 2% target, Haddad still believes there could be one more 25 basis points increase to 4.50% by the end of the year.
Norway's carry and energy exposure are seen as ongoing tailwinds for NOK. The headline CPI rose to 3.3% year-over-year (y/y) in August, exceeding the 3.0% consensus and Norges Bank's 3.0% projection. While underlying CPI matched the consensus at 3.0% y/y, it was lower than Norges Bank's 3.3% projection. The month-on-month decrease in underlying CPI was slightly higher than expected at -0.5% (versus -0.4% consensus), compared to a +0.8% increase in July.
Despite this cooling effect, inflation has consistently been running above Norges Bank's 2% target for several years, suggesting another 25 basis point hike to 4.50% by year-end. Norway's favorable carry and energy exposure continue to be significant tailwinds for NOK.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.