Norwegian Krone Holds Firm as Labour Secures Second Term

The Norwegian krone weakened to 10 per USD after briefly reaching 9.86 on Tuesday, its strongest level since February 2022, following Norges Bank’s surprise decision to cut interest rates.

At its June meeting, Norway’s central bank reduced its policy rate by 25 basis points to 4.25%—the first cut in five years—and signaled further reductions ahead due to a more benign inflation outlook.

This move is viewed as a “cautious normalization” of the central bank’s policy, which has remained significantly higher than those of many other countries.

Governor Ida Wolden Bache emphasized that a restrictive monetary policy remains necessary, albeit less stringent than before.

She hinted at additional rate cuts, forecasting the policy rate to fall to just below 4% by the end of 2025 and around 3% by late 2028.

Core inflation eased more than expected to 2.8% in May but still remains above the central bank’s 2% target.

USDNOK decreased to a 22-month low of 10.05.

Over the past 4 weeks, US Dollar Norwegian Krone lost 2.25%, and in the last 12 months, it decreased 4.71%.

USDNOK decreased to a 12-month low of 10.33.

Over the past 4 weeks, US Dollar Norwegian Krone lost 6.82%, and in the last 12 months, it decreased 3.62%.

Norway's Norges Bank kept rates on hold at 4.50% on Thursday, noted Societe Generale.

This wasn't a major surprise following the re-acceleration of inflation in February, but Norway's central bank is still confident that rates will come down later this year, wrote SocGen in a note to clients.

The forecast profile was raised out to 2027 and the policy rate now stays above 3% over the horizon. The path was raised to 4.21% for end 2025 from 3.80%, end 2026 to 3.42% from 3.16% and end 2027 to 3.11% from 2.91%.

Headline inflation was revised up for this year to 3.0% from 2.6%, the underlying CPI/ATE to 3.4% from 2.7%. Wages were revised up by 0.3pp for 2025 to 4.5% and for 2026 to 4.0%.

The Committee judges that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon, stated the bank. The uncertainty surrounding the outlook is greater than normal, and the future path of the policy rate will depend on economic developments.

The korne (NOK) strengthened on the policy decision, added SocGen. Support for is located at 11.28/11.25 and for at 10.38.

USDNOK increased to a near 5-year high of 11.48.

Over the past 4 weeks, US Dollar Norwegian Krone gained 2.91%, and in the last 12 months, it increased 11.28%.