NOK: Inflation data points to earlier interest shift – Commerzbank

Norway’s inflation figures published last week need, in my opinion, a little more explanation. After all, the figures provided the first indications of a possible turn in interest rates in the near future, and Norges Bank is one of the few G10 central banks that has not yet started cutting interest rates, and the The market is barely pricing in rate cuts, at least so far, says Michael Pfister, FX analyst at Commerzbank.

The turnaround in interest rates will begin sooner than expected

“During the last ten months, the general rate has been on average slightly lower than compatible with the inflation objective, with the exception of October and November, when the general rate was significantly higher than in recent months. The situation “It’s a little bit different for the underlying rate, but here we’ve also seen readings over the last four months that are roughly in line with the target.”

“Norway appears to have made significant progress in reaching the target. Of course, it should be noted that it is also quite possible that inflation in Norway will rise a little in the coming months. One factor pointing in this direction is that oil prices “Oil prices have risen again. Other energy prices are also likely to rise again in view of the colder months ahead. However, it remains to be seen whether this will be the case.”

“On the other hand, this means that the risks of Norges Bank beginning the turnaround in interest rates earlier than expected have increased considerably over the summer. Currently, Norges Bank’s interest rate trajectory implies a possible first movement in March 2025. But a first hint in November, followed by a first cut at the December meeting or perhaps in January? This seems much more realistic if the latest inflation figures hold.”