Francesco Pesole at ING sees some downside risks for the Norwegian Krone from Norges Bank’s meeting, as benign CPI‑ATE prints could tilt communication slightly less hawkish. He still expects rates to stay at 4.25% today and another hike later this year, but is less convinced about multiple moves. Despite limited upside for front‑end NOK rates, ING keeps a bullish NOK stance with a 10.75 EUR/NOK year‑end target.
Norges Bank tone versus NOK fundamentals
“This morning’s Norges Bank meeting carries some downside risks for NOK. In this article, we discuss why we think policymakers will keep rates at 4.25% (in line with expectations), but still expect them to hike rates again later this year.”
“However, we cannot ignore the two benign 2.7% CPI-ATE prints in June and July and how they might tilt the balance to a slightly less hawkish tone. We see little upside room for front-end NOK rates anyway at this stage.”
“Markets are pricing in 27bp of tightening by year-end, broadly in line with our base case, but we have become less convinced about another hike and even less convinced about the prospect of more than one.”
“That is not a major concern for our bullish NOK views, however. Fundamentals and an attractive carry regardless of another hike, and we remain bullish on the krone with a 10.75 target versus EUR at the end of December.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
