Norway’s central bank dropped explicit guidance for a near-term rate increase, signaling a potential dovish shift that may weaken NOK appeal.
Norway’s central bank left its policy rate unchanged at 4.25% but softened its hawkish stance, removing explicit guidance for a near-term hike. The bank still expects one more rate increase but indicated it may not be imminent, citing lower-than-projected inflation this summer.
The previous statement had pointed to a hike at an upcoming meeting, but this was replaced with a more cautious line: “It may thus still become necessary to raise the policy rate.” Inflation remains above target, though recent prints have undershot forecasts. New economic projections are due in September.
The krone’s appeal may diminish as the dovish pivot reduces carry trade attractiveness. The NOK underperformed peers like the AUD and CAD, with the 2-year UST/NGB spread widening by 4.4 basis points, limiting tactical support.