Norwegian Krone: Rate hike odds slashed after soft inflation – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes that Norwegian Krone (NOK) is trading mixed as firmer Oil offsets the drag from reduced Norges Bank tightening expectations. Norway’s underlying inflation (CPI-ATE) stayed at 2.7% year-on-year, below consensus and the Bank’s projection, prompting markets to sharply cut the probability of a rate hike, though Haddad still expects guidance for another increase to be retained.

Softer core inflation hits hike expectations

"NOK is mixed. Firmer crude is offsetting the drag to NOK from lower Norges Bank rate expectations."

"Norway underlying inflation undershot expectations in July. CPI-ATE was unchanged at 2.7% y/y for a second straight month, below both the 2.9% consensus and the Norges Bank’s 3.3% projection."

"Headline CPI was hotter at 3.0% y/y (consensus: 2.8%) vs. 2.7% in June but is still running below the Norges Bank’s 3.1% forecast."

"Markets sharply pared back Norges Bank rate hike bets for Thursday’s policy decision to 6% from 25% before the CPI release."

"Still, we anticipate the Norges Bank to retain its guidance for another hike “at one of the forthcoming monetary policy meetings” because inflation has remained above target for several years."

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