NOK: Oil and conflict overshadow Norges Bank path – Commerzbank

Antje Praefcke at Commerzbank notes that Norwegian inflation fell in February but remains too strong for an imminent policy shift. She expects Norges Bank to stick to its guidance of 1–2 cuts this year while stressing risks from a stronger krone and higher energy prices, with NOK driven mainly by Oil and Middle East developments near term.

Oil-driven dynamics outweigh inflation surprise

"In December, Norges Bank signaled 1-2 interest rate cuts this year, expecting inflation rates to fall toward the 2% target over the course of the year."

"All in all, however, it is likely to stick to its current course for the time being and continue to signal its willingness to cut interest rates, provided that developments in the Iran conflict and energy prices do not thwart its plans (as is the case with many other central banks)."

"Monetary policy is therefore unlikely to be a factor."

"For weeks, the NOK has been benefiting from the tensions and ultimately from the outbreak of the Iran conflict."

"If the situation eases, corrections could quickly follow. As a result, further developments in the Middle East conflict and oil prices will remain the main drivers of the NOK in the short term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)