EUR/NOK: Krone is vulnerable if Norges Bank does not hike in December – Nordea

Norges Bank decided to up the ante again and not only increased the key rate by 25 bps to 4.25% but also signalled one more rate hike before the end of this year. However, the NOK is fairly unchanged after the message. Economists at Nordea analyze Krone’s outlook.

Another hike is not a given

Norges Bank increased the key rate as expected and somewhat unexpectedly signaled a new hike in December. 

We are not buying Norges Bank’s CPI estimates for next year and believe that a hike in December is not cut in stone.

The hawkish signals from Norges Bank are probably in an effort to support the NOK and curtail further weakening. If Norges Bank does not hike in December, as we think is a fair possibility, the NOK is vulnerable.