Watch out for rate cut speculation for Norges Bank – Commerzbank

The last important data is available today ahead of next week’s Norges Bank meeting: inflation figures for August, notes Commerzbank FX analyst Antje Praefcke.

Norges Bank is unlikely to advance interest rate cuts

“The underlying trend, particularly for core inflation, is still quite high. Annual rates were 2.8% for the headline rate in July and 3.3% for the base rate, well above the 2% target. It is unlikely that much will have changed in August.”

“At the August meeting, Norges Bank noted that inflation has slowed considerably. However, inflation is still above target and some factors could contribute to keeping inflation high. For Norges Bank, one of these factors is the depreciation of the krone. After all, the weak krona implies inflation risks, but it cannot be definitively explained even by Norges Bank.”

“The market sees the possibility that Norges Bank, contrary to its forecasts, may lower the policy interest rate before the end of the year. Those expectations could gain momentum if inflation figures surprise lower today. However, I would be cautious about jumping on this bandwagon. Because as long as the NOK trades weakly and is repeatedly under downward pressure, it is unlikely that Norges Bank will advance prime rate cuts.”