Markets slash Norges Bank rate hike odds to 6% after July CPI-ATE undershoots forecasts at 2.7% year-on-year.
The Norwegian Krone traded mixed as softer-than-expected core inflation reduced expectations for a Norges Bank rate hike. Norway’s CPI-ATE held at 2.7% year-on-year in July, below the 2.9% consensus and the central bank’s 3.3% projection, prompting markets to cut rate hike probabilities to 6% from 25% ahead of Thursday’s decision.
Headline CPI rose to 3.0% year-on-year, above the 2.8% consensus but still below the Norges Bank’s 3.1% forecast. Despite the miss, analysts expect the bank to retain guidance for another hike in upcoming meetings, citing persistent inflation above target.
Oil price strength provided some support for the Krone, offsetting the negative impact of reduced tightening expectations.