Danske Research Team notes that Norges Bank left its policy rate at 4.25% and kept a tightening bias despite weaker summer inflation. They still expect one final hike in September, though the odds have fallen and the decision is now finely balanced. NOK weakened after the announcement and softer Oil investment and wage data were seen as broadly neutral to slightly positive for Norges Bank.
Rate path uncertain as NOK softens
“In Norway, Norges Bank kept the policy rate unchanged at 4.25%, as expected. The Monetary Policy Committee maintained its tightening bias, acknowledging weaker-than-expected inflation over the summer but stressing that inflation is still too high. They repeated that it “may still become necessary to raise the policy rate”.”
“Also in Norway, Statistics Norway’s quarterly oil investment survey showed upward revisions for both 2026 and 2027. The revisions point to small nominal declines in oil investment of 0.1% this year and 0.9% next year, leaving the release broadly neutral for Norges Bank.”
“The more important signal came from the wage figures, where annual wage growth slowed to 4.0% y/y in Q2 from 4.3% in Q1, below Norges Bank’s 4.5% estimate for 2026. Together with the latest inflation figures, this should be positive news for Norges Bank and may suggest that wage growth is slowing faster than expected.”
“The most notable movement in the FX market yesterday was the NOK that weakened after Norges Bank held interest rates unchanged and the oil price dropped. SEK recovered a bit and EUR/USD was about flat on the day.”
“We maintain our call for a final hike in September, although the probability has clearly fallen and it is now a close call. Much will depend on whether August core inflation moves back above 3% and on the incoming growth figures.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
