Norges Bank can still hike this year
Lead — The desk views Norges Bank's path toward potential rate hikes as cautiously optimistic despite recent cooler inflation data, suggesting the first hike may still occur in September. Per the full note from ING, the Norges Bank's inflation projections have weakened, leading to a hesitant outlook for August, although they still anticipate further tightening this autumn. The desk notes that while the current inflation metrics are softer than originally expected, there remains an expectation for underlying inflation to rebound, which will be pivotal for future rate decisions. We are currently positioned with the consensus target for the Norwegian Krone at 1.075 against the euro, reflecting contrasting views among key institutions.
What the desk is arguing
The desk articulates a stance that Norges Bank still has room to hike rates later this year, with a likely September move as inflation pressures could respond positively despite the recent softening. Per the full note from ING, while current inflation measurements suggest caution, the potential for a rebound remains, indicating Norges Bank still leans toward tightening this fall.
Key metrics show that headline CPI and CPI-ATE have failed to meet the central bank’s prior expectations, with July's CPI-ATE holding at 2.7%, below Norges Bank's forecast of a rise to 3.3%. This mismatch raises questions about the sustainability of current inflation trends and the bank's response strategy moving forward.
Where it sits in our coverage
Our consensus target for the EUR/NOK is set at 1.075, with a range between 1.04 and 1.12. Specific targets include:
This view aligns closely with the average consensus, reflecting the cautious optimism shared among forecasters like jpmorgan. Unlike some diverging forecasts from bofa, which propose a weaker outlook for NOK, we see greater upside potential, especially if inflation begins to meet the bank's targets.
How other firms see it
Aligning with our view, firms such as jpmorgan share an optimistic take on NOK, anticipating further rate hikes and a stronger currency outlook. In contrast, bofa presents a more defensive position, suggesting subdued expectations for NOK's appreciation.
Related considerations should be given to the broader EUR/USD dynamics, as movements in the Eurozone may influence the trajectory of NOK positioning, particularly in the context of Norges Bank’s rate decisions and future ECB actions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Norges Bank may hike rates in September despite recent softer inflation data.
- 02Current inflation levels are below central bank projections, raising concerns about future policy moves.
- 03The ongoing sentiment supports a bullish outlook for NOK towards the year-end.
- 04Varying targets among firms indicate a divergence of expectations for NOK's performance.
Market implications
Traders should watch for inflation data leading up to the September Norges Bank meeting. A continued softening in inflation could shift expectations of a rate hike, while a recovery trajectory could strengthen NOK further. Positioning ahead of this key event remains crucial for tactical trades.
Risks to this view
Should inflation metrics continue to underperform expectations, or if Norges Bank signals a prolonged pause on rate tightening, these factors could significantly alter the projected trajectory for NOK and undermine the current bullish outlook.
Articles Norges Bank can still hike this year Published 14:30 Norway Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Cooler inflation means a hold is likely at Norway’s central bank meeting on 13 August. Our conviction on further tightening has somewhat weakened, but we still lean in favour of another hike in autumn on the back of an underlying inflation rebound. We remain optimistic on NOK into year-end, even though upside room for front-end rates looks limited Francesco Pesole Norges Bank in Oslo Since Norges Bank’s hike to 4.25% in June, we have been expecting one more hike this year, with September as our baseline and some underpriced risk of a surprise move in August.
Our baseline was September but saw some underpriced risks of a surprise August move. However, the latest inflation prints have weakened that conviction. We now see a very low risk of a 13 August hike and lower odds of a follow-up move in the autumn, although another hike remains our base case.
Inflation improvement may be temporary Norges Bank focuses on two inflation gauges: headline CPI and underlying CPI-ATE. Headline inflation fell to 2.7% in June before rebounding to 3.0% in July. CPI-ATE also dropped to 2.7% in June, but then unexpectedly held at 2.7% in July.
That is notably softer than Norges Bank's June projections, which envisaged CPI-ATE rising to 3.3% in June and remaining above 3.0% until mid-2027. Underlying inflation undershot projections in June and July Source: ING, Norges Bank, Macrobond "> Source: ING, Norges Bank, Macrobond The issue is not whether Norges Bank would hike with CPI-ATE at current levels. We struggle to see a case for that.
The last time CPI-ATE was below 3.0%, at 2.8% in May 2025, Norges Bank cut rates. Its published projections imply a similar reaction function around mid-2026, when it expected to begin easing. The more important question is whether underlying inflation rebounds.
The June 2025 rate cut proved a policy mistake because Norges Bank placed too much weight on a single inflation print. Inflation quickly moved back above 3.0%, highlighting a degree of month-to-month volatility that we think policymakers now take much more seriously. Our estimates still point to CPI-ATE moving back above 3.0% this autumn.
Recent base effects have weighed on inflation and could begin to reverse as early as August, partly because of the kindergarten price cap. Wage growth also remains elevated, with the 2026 wage settlement at 4.4%. Hold in August, but another hike remains possible We also think the bar for another hike is relatively low.
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