Norwegian Krone: Gradual disinflation delays rate cuts – Nomura

Nomura strategists note that Norges Bank kept its policy rate at 4.50% in November and signalled a willingness to hike again if needed. They expect no further rate changes in 2026–2027 and see the next move as a cut, likely only from 2028, given very gradual disinflation in Norway.

Norges Bank seen on extended hold

"Norges Bank left its policy rate unchanged at 4.50% at its November meeting, as we and consensus expected."

"The Governor’s guidance was that “it will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target within a reasonable time horizon”. This is in line with what we expected and similar to the guidance from September."

"In the minutes accompanying today’s announcement, policymakers highlighted concerns that inflation has remained above target for several years and that the rapid rise in business costs in recent years will likely contribute to keeping inflation elevated ahead."

"Therefore, even if underlying inflation falls towards 2%, we think the bar to the first Norges Bank rate cut is quite high, as policymakers will want to see evidence of a sustained slowdown in price growth."

"In our central forecast, we believe that the next move from Norges Bank is likely to be a cut. However, this is unlikely to occur until 2028 at the earliest, as we forecast the disinflation process in Norway to be very gradual."

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