Norges Bank's consistent stance on price stability is an asset for NOK – Commerzbank

Antje Praefcke, FX Analyst at Commerzbank, analyzes Norwegian Krone’s (NOK) outlook after Norges Bank kept policy rates unchanged as expected on Thursday's policy meeting.

Norges Bank is keeping the option open to hike the policy rate again if necessary

I have to admit that I am delighted with Norges Bank and its monetary policy. That's what I call a consistent monetary policy in the interests of price stability.

After raising interest rates to 4.50% in December, Norges Bank indicated that the policy rate would probably remain at this level until the fall, but at the same time did not rule out a further tightening should it be necessary.

Norges Bank is keeping the option open to hike the policy rate again if necessary. By the next meeting at the end of March, it will know the inflation data for January and February and, of course, have a whole bunch of fresh economic data at its disposal. If inflation continues to fall, Norges Bank can then revise its projections, definitively signal the end of the interest rate cycle and adjust its interest rate path if it is considering earlier rate cuts by then.

Norges Bank's consistent stance on price stability is an asset for NOK. There are certainly other factors influencing the NOK's performance in the coming weeks, such as the oil price or risk aversion in the market, but monetary policy should provide it with steady support. I therefore continue to feel comfortable with my forecast of an appreciating NOK.