Commerzbank’s Antje Praefcke anticipates that Norges Bank will keep its policy rate unchanged at 4.0% during the upcoming meeting, while maintaining a distinctly hawkish tone compared to the Riksbank [1]. Norwegian inflation remains above target, with the headline rate at 3.6% and the core rate at 3.0% [1]. This elevated inflation prompted Norges Bank to reverse its policy stance in March, now projecting one or two rate hikes by the end of the year [1].
Praefcke notes that it is likely too early for Norges Bank to raise rates at the current meeting, as the central bank prefers to monitor developments related to the Iran conflict before taking further action [1]. However, the bank has signaled its willingness to raise rates and may do so in June, especially if the Middle East conflict persists and continues to pose risks to inflation and inflation expectations [1].
The upcoming interest rate meeting is expected to be relatively neutral for the Norwegian Krone (NOK), unless Norges Bank surprises markets with an immediate hike [1]. As an energy exporter, Norway is considered to be in a stronger position amid the current crisis compared to the euro area or Sweden [1]. Consequently, Commerzbank expects EUR/NOK to trend gradually lower and NOK/SEK to break above parity on a sustained basis [1].
CONCLUSION
Norges Bank is expected to hold rates steady at 4.0% but maintain a hawkish outlook due to persistent inflation pressures. The central bank's stance supports a gradual strengthening of the NOK, with potential for rate hikes later in the year if geopolitical risks persist. Market reaction is likely to be muted unless an unexpected rate move occurs.