Norwegian Krone: Softer inflation clouds September hike odds – Danske Bank
Danske Research Team reports that Norwegian core inflation rose to 3.0% year-on-year in August, below Norges Bank’s June projection of 3.3%.
Norwegian core inflation reached 3.0% year-on-year in August, falling short of Norges Bank's June projection of 3.3%. This signals a potential lower rate path, reducing the likelihood of future hikes. The bank currently anticipates a tight decision in September, with a chance that the bank may decide to maintain its current stance.
Core inflation in Norway rose to 3.0% y/y in August, aligning closely with expectations of 3.1% (Cons.: 3.0% Prior: 2.7%). While this suggests a more favorable outlook for interest rates, other factors present contrasting perspectives. Growth remains subdued, and the Norwegian Krone (NOK) is appreciating, while global rate expectations are higher.
The September decision will largely depend on whether the regional survey on September 17 surprises to the upside. With no such improvement expected, market expectations around the meeting may heavily influence the outcome. The probability of a September hike has decreased as a result of this new data point. Although the oil price unexpectedly surged, the Norwegian Krone strengthened, reaching a level of 10.80 against the Euro. This upward momentum in the NOK, however, appears to be waning.
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