NOK: 25bp by Norges Bank today
We expect Norges Bank to hike by 25bp today, in line with previous guidance. The previous hike was a larger one (50bp), but the trade-weighted strengthening in the krone and some improvements on the inflation side will allow policymakers to hike by a smaller amount today.
Markets are pricing in a peak in Norwegian rates after today’s 25bp hike, but we feel they are underestimating the chances of another hike in September. Much will depend on the krone’s performance: we are positive on NOK in the medium term but cannot exclude some risk-off corrections to generate some “scares” for the central bank and trigger another rate hike.
Anyway, today is an interim meeting with no new rate projections. We cannot exclude Norges Bank will hint at openness to more tightening, and we see upside risks for NOK anyway, given the rather flat market pricing.
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