Norwegian Krone: Rate hike risks support currency – BBH

Brown Brothers Harriman notes that the Norwegian Krone (NOK) is softer against most peers following a modest pullback in Oil prices, but September CPI data keep further Norges Bank rate hikes in play, offering support to NOK. Sticky underlying inflation above the central bank’s forecasts means the option to raise rates further remains open, with markets pricing roughly 50% odds of another hike by year-end.

Inflation keeps Norges Bank on alert

"NOK is weaker against most peers on a modest pullback in crude oil prices. Norway’s mixed September CPI keeps further Norges Bank rate hikes in play, supporting NOK."

"Headline CPI rose less than expected to 3.4% y/y vs. 3.3% in August, below consensus of 3.6% and the Norges Bank’s 3.5% projection. Underlying CPI remained at 3.0% y/y for a second straight month, below consensus of 3.1% but above the Norges Bank’s 2.9% projection."

"At its last September meeting, the Norges Bank increased the policy rate 25bps to 4.50% and signaled preparedness to “raise the policy rate further if warranted by the inflation outlook.”"

"Sticky underlying inflation above its forecasts keeps that option on the table. The swaps curve still price-in roughly 50% odds of another 25bps hike to 4.75% by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)