Commerzbank’s Antje Praefcke notes that stronger January inflation in Norway, with headline at 3.6% and core at 3.4% year-on-year, confirms that interest rate cuts by Norges Bank are off the table for now. Praefcke notes that NOK has gained on the data and higher Oil prices, and stresses that real rates must not fall further if the Krone is to hold its recent gains.

Higher inflation supports NOK and rates

"With the Norwegian inflation figures for January, even those who still had doubts despite the recent statements made by Norges Bank should now realize that interest rate cuts by Norges Bank are off the table for the time being. This is because inflation rates rose to 3.6% (headline rate) and 3.4% (core rate) year-on-year."

"Even more important is the underlying trend, i.e., the seasonally adjusted monthly rate of change. Here, too, it is clear that inflationary pressure is too high to be in line with the inflation target and allow Norges Bank to relax its vigilance."

"The NOK gained significantly following yesterday's announcement. However, the oil price, which has been rising again for several days, is likely to have provided additional momentum. Nevertheless, it is important that the real interest rate does not fall further (due to the rise in inflation) so that the NOK can maintain its gains."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)