Will Norges start earlier?

In Norway, inflation has remained at high levels for a long time compared to other countries, especially the core rate. But over the summer, the disinflation process in Norway has made significant progress, and seasonally adjusted data in recent months are broadly consistent with the inflation target. So far, Norges Bank has been very cautious about rate cuts. In its current interest rate path from September, it does not signal a first possible interest rate cut until March 2025. However, in view of the positive inflation trend of recent months, the risks have increased that Norges Bank could become active sooner, Commerzbank’s FX Analyst Antje Praefcke notes.

The NOK continues to be weak

“I think it is out of the question for Norges Bank to lower rates today. That would come as a surprise and be too early, especially since the inflation data for October will not be published until tomorrow. However, I can imagine that Norges Bank will give a first hint today that the key rate could be lowered sooner rather than later. In December, it could then lower the key rate on the basis of the new forecasts in the new Monetary Policy Report, or in January.”

“In my opinion, January is likely to come into focus, because at the December meeting, Norges Bank will have the inflation data for October and November. These could influence Norges Bank's new forecasts to the extent that it considers a first cut in January to be necessary. Norges Bank could then adjust the interest rate path accordingly in December and prepare the market for the interest rate turnaround.”

“The NOK remains weak due to the uncertain geopolitical situation and the weak oil price, although it was able to gain slightly against the euro yesterday, but primarily due to the weakness of the euro. It is therefore questionable whether it can benefit from Norges Bank's decision. In addition, the real interest rate would have to improve significantly compared to other currency areas. I fear that the NOK will continue to have a hard time for the time being.”

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