As mentioned, this is a close call. But on balance, we still see a cut as slightly more likely \u2013 driven primarily by market-related factors.<\/p>\n
NOK levels have consistently played a key role in Norges Bank\u2019s policy decisions. Given the krone\u2019s low liquidity, sell-offs tend to be sharp, and the Bank has viewed currency depreciation as a key inflationary risk over the past three years. Just as FX market considerations likely influenced the June decision, we suspect they will again.<\/p>\n
EUR\/NOK was trading at 11.40 on 18 June when Norges Bank delivered a cut that was entirely unpriced. The resulting NOK sell-off was significant. Today, after a not-usual roller-coaster ride, EUR\/NOK sits at 11.60 \u2013 but crucially, markets are already pricing in 17bp of easing for this meeting. That means the negative impact of a cut on NOK would likely be more muted, especially if policymakers accompany it with cautious forward guidance for December and beyond.<\/p>\n
Given the unpredictable nature of external drivers for NOK, failing to cut during a rally could be a missed opportunity.<\/p>\n
Importantly, rates remain restrictive at 4.25%. Using core CPI as the benchmark (rather than the less-regarded headline rate), a hold would leave Norway with the highest real policy rate in the G10 \u2013 assuming the Fed delivers a widely expected 25bp cut next week.<\/p>\n","protected":false},"excerpt":{"rendered":"As mentioned, this is a close call. But on balance, we still see a cut as slightly more…\n","protected":false},"author":2,"featured_media":16991,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-16990","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/16990","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=16990"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/16990\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/16991"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=16990"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=16990"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=16990"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}