Societe Generale notes Norway’s central bank kept its policy rate unchanged at 4.25% and softened its hawkish tone. The bank still anticipates one further rate increase, but removed explicit guidance for a near-term hike. With new forecasts due in September, the report warns that a more dovish stance could reduce the attractiveness of the Krone for investors.

Norges Bank softens hawkish guidance

“Norway’s central bank kept rates on hold at 4.25% but toned down the hawkish language. It still sees one rate increase but there is no urgency.”

“The explicit guidance for a rate hike “at one of the forthcoming monetary policy meetings” was dropped from the statement and replaced with the following: “It may thus still become necessary to raise the policy rate”. “Inflation has slowed and been lower than projected by the bank this summer.”

“It is still judged too high and it is too early to conclude that the inflation outlook has changed materially. New forecast will be published in September but a dovish turn could potentially diminish the appeal of the krone.”

“The AUD and CAD lead gains and the NOK is the only currency where the 2y UST/NGB spread has widened (+4.4bp), choking off tactical support for the krone.”