Commerzbank’s Antje Praefcke highlights uncertainty over whether Norges Bank will hike in September or wait until December. Inflation remains above target despite a recent downside surprise, while growth is described as close to normal. The regional network survey is seen as decisive, with Oil prices and Middle East developments still the main drivers for NOK.

Norges Bank decision and NOK drivers

“Up in the far north, in Norway, things are also likely to be interesting whether Norges Bank will raise its policy rate as early as September or choose to wait and see.”

“Furthermore, inflation remains well above the 2% target (the headline rate in July was 3% yoy, the core rate 2.7%), and the rapid rise in business costs in recent years will help keep inflation at elevated levels going forward.”

“The big question, therefore, will be whether Norges Bank will look past this effect and revise its (new) inflation forecasts downward in September or not.”

“If the report shows that businesses are anticipating solid demand, rising wages, and high capacity utilization, the rate hike could take place as early as next week.”

“If companies sound less positive about the outlook for the next six months, Norges Bank is likely stand pat and wait for the December meeting; after all, it will have more information available by then.”