Downside risks will continue to dominate NOK short-term – Commerzbank

It is quite possible that in August Norges Bank will hike its key rate more strongly than the 25 bps signalled. However, the Norwegian krone is set to remain under pressure amid the risk of a massive energy crisis, economists at Commerzbank report.

More pronounced rate hikes in Norway possible

“The CPI data for July is likely to be decisive for the extent of the step –25 or 50 bps – as the data will be available prior to the August meeting. If the data continues to point towards continuous upside pressure on prices, Norges Bank is likely to hike by another 50 bps. This might provide support for NOK. 

“However, while the uncertainty about a possible gas crisis keeps risk aversion high, the krone will continue to struggle. I, therefore, expect that downside risks will continue to dominate NOK short-term.”