Key Moments
- The Norwegian Krone (NOK) is trading softer against most major currencies amid a modest decline in crude oil prices.
- September CPI data show headline inflation at 3.4% year-on-year and underlying inflation at 3.0% year-on-year, with the latter exceeding Norges Bank’s projection.
- Markets are pricing roughly 50% odds of another 25 basis point Norges Bank rate increase to 4.75% by year-end.
Market Reaction to Oil and Inflation
Brown Brothers Harriman reports that the Norwegian Krone (NOK) is currently weaker against most of its major counterparts, a move they link to a modest pullback in crude oil prices. At the same time, the latest inflation figures are keeping the prospect of additional monetary tightening by Norges Bank in focus, which in turn offers some support to the currency.
According to the firm, “NOK is weaker against most peers on a modest pullback in crude oil prices. Norway’s mixed September CPI keeps further Norges Bank rate hikes in play, supporting NOK.”
Details of September CPI Data
The September inflation release presented a mixed picture relative to both market expectations and Norges Bank’s own projections. Headline CPI increased to 3.4% year-on-year from 3.3% in August. This outcome was below the consensus forecast of 3.6% and also under the central bank’s projection of 3.5%.
Underlying CPI, however, held steady at 3.0% year-on-year for a second consecutive month. This measure came in slightly under the consensus estimate of 3.1% but remained above Norges Bank’s 2.9% projection, indicating more persistent price pressures than the central bank had anticipated.
| Indicator | Latest Reading | Previous | Market Consensus | Norges Bank Projection |
|---|---|---|---|---|
| Headline CPI (y/y) | 3.4% | 3.3% | 3.6% | 3.5% |
| Underlying CPI (y/y) | 3.0% | 3.0% | 3.1% | 2.9% |
Norges Bank Policy Stance and Market Pricing
Brown Brothers Harriman highlights that at its most recent September meeting, Norges Bank increased its policy rate by 25 basis points to 4.50%. The central bank also signaled that it was prepared to tighten further if the inflation backdrop warranted additional action: “At its last September meeting, the Norges Bank increased the policy rate 25bps to 4.50% and signaled preparedness to ‘raise the policy rate further if warranted by the inflation outlook.’”
The persistence of underlying inflation above the central bank’s forecast is described as a key factor maintaining the possibility of another rate move: “Sticky underlying inflation above its forecasts keeps that option on the table. The swaps curve still price-in roughly 50% odds of another 25bps hike to 4.75% by year-end.”
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