Commerzbank’s Antje Praefcke notes that inflation in Norway fell in February but remains too high for an imminent policy change. He expects Norges Bank to stick to its target of 1-2 cuts this year, while highlighting risks from a stronger krona and higher energy prices, with NOK driven mainly by developments in the oil and Middle East markets in the near future.
Oil-led momentum outweighs inflation surprise
“In December, Norges Bank signaled 1-2 interest rate cuts this year, expecting the inflation rate to fall to its 2% target within a year.
“All in all, however, he will probably stay at the current rate for now and continue to signal his willingness to reduce interest rates, provided that the development of the conflict in Iran and energy prices do not thwart his plans (as is the case with many other central banks).
“Monetary policy is therefore unlikely to play a role here.”
“For weeks, the SAI has been benefiting from the tensions and ultimately the outbreak of the Iran conflict.”
“If the situation calms down, corrections could occur quickly. As a result, further developments in the Middle East conflict and oil prices will remain the main drivers of SAI in the short term.”
(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)
