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Higher Norway CPI Will Result in More Rate Path Pressure

NORGES BANK
  • NOK the poorest performer in G10 through the London close, prompting USD/NOK to recovery back above the 50-dma and partially reverse four consecutive sessions of losses.
  • Moves come ahead of tomorrow's April CPI release, with markets expecting the CPI-ATE Y/Y measure to slow to 6.1% from 6.2% prior. The figure has beaten expectation in 3 of the 4 releases so far in 2023, with persistent underlying inflation a key factor in the Norges Bank's decision to continue their tightening cycle (expected to peak at 3.75% I.e. 50bps further hikes into H2 this year).
  • The weakness for the NOK is key here, with sell-side consensus for inflation being revised higher to accommodate for the weaker currency. As such, a higher than expected inflation release Wednesday will result in further upside pressure on rate path projections for the June meeting - potentially tipping the assumed peak rate closer to 4.00% this year.

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