Norges Bank maintained the policy rate as expected but we got a slightly hawkish surprise. Economists at ING analyze Norwegian Krone’s (NOK) outlook after the central bank decision.
Norges Bank’s cautious tone on policy and focus on the domestic currency performance offer a good basis
Norges Bank has maintained a generally hawkish stance, keeping its rate projections unchanged and signaling that rate cuts are likely to commence in the autumn, proceeding gradually.
Governor Ida Wolden Bache has consistently expressed concern regarding the weak NOK and the potential inflationary risks associated with premature rate cuts. The subdued performance of the Krone since the beginning of the year has only heightened her apprehension on this matter.
There remains significant potential for upside in the NOK once USD rates begin to decline, supported by Norges Bank’s cautious approach to policy and its attention to the performance of the domestic currency.
