These are tough times for the Norwegian Krone. Will Norges Bank be able to give NOK some strength? Economists at Commerzbank analyze what should do the central bank to support the currency.

It would be disastrous not to hike the key rate further

“It would be disastrous not to hike the key rate further in view of the broad-based inflation pressure, even less so signalling an end of the rate cycle. Even though Norges Bank was one of the first central banks to hike its key rate while inflation pressure does not show any signs of easing Norges Bank will have to keep a tight grip on the situation and keep the door open for further hikes.”

“If Norges Bank, who seems less restrictive compared to the ECB anyway, chooses this approach it can help NOK to gain new strength as the market, contrary to the analysts’ opinions, is expecting unchanged key rates and significant rate cuts in the autumn and would therefore have to adjust its expectations significantly. Otherwise, it will be difficult for NOK to record notable gains against the Euro in the near future and downside potential will then dominate instead.”