NOK: Inflation shock reshapes rate path – Rabobank

Rabobank’s Jane Foley notes that stronger-than-expected Norwegian CPI data has upended the Norges Bank’s easing narrative, pushing markets to price an extended pause instead of further cuts. NOK has become the best-performing G10 currency in 2026, and Rabobank now expects EUR/NOK at 11.00 on a 12‑month horizon, reflecting Norway’s strong fiscal and external positions.

Sticky inflation stalls Norges Bank easing

"On the back of the market’s change in expectations regarding Norges Bank policy, the NOK is currently the strongest performing G10 currency in the year to date, followed by the AUD. We had been forecasting the NOK to perform well in 2026 based on Norway’s strong fiscal and current account positions. Even so, given the change in the policy outlook we have tweaked our EUR/NOK forecasts and brought forward our forecast of 11.00 to a 12 month view."

"Currently market implied policy rates for the Norges Bank are reasonably flat for the remainder of this year. This marks a sharp contrast to the start of 2026, when market rates were confidently priced for further rate cuts from the Norges Bank."

"While the Norwegian CPI inflation release sparked a significant turnaround in policy expectations, the signals from policymakers in January had already showed signs of wavering. In contrast to December’s dovish signals, in January the Norges Bank stated that “the outlook is uncertain.” Although it maintained that “if the economy evolves broadly as currently envisaged, the policy rate will be reduced further in the course of the year,” Governor Wolden Bache noted that “we are not in a hurry to reduce the policy rate. Inflation is still too high”."

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