– Norges Bank can be ready with the whip – E24

A weak krone exchange rate means that Norwegians “in the worst case” can expect another interest rate hike, writes Handelsbanken.

The krone exchange rate is significantly weaker than expected by Norges Bank, Handelsbanken writes in its morning report.

On Tuesday morning, one euro is traded for NOK 11.75, while you have to pay NOK 10.95 for one dollar. It shows figures from the data provider Infront.

The weak exchange rate speaks for pushing the first rate cut further in time, and “in the worst case we are talking about a new rate hike from Norges Bank”, the bank believes.

In the interest rate path

The morning report is signed by chief economist Marius Gonsholt Hov and interest rate and currency strategist Nils Kristian Knudsen.

At the same time, they remind that Norges Bank’s interest rate path contains a probability of between 5 and 10 per cent that the interest rate will be raised again in the second quarter.

“It can be read as Norges Bank is ready with the whip if the weak trend for the krona continues, we get an even more expensive wage settlement than expected, or both,” write the economists.

Can be supported by the oil price

An increase in oil prices should nevertheless provide some support for the Norwegian krone in the long term, according to Handelsbanken.

Higher oil prices often mean a stronger krone.

At the time of writing, a barrel of North Sea oil (burnt spot) is trading for 87.96 dollars. In the last five days, the oil price has risen by more than 2.5 dollars, according to Infront.

Handelsbanken nevertheless expects that fluctuations in the krone exchange rate will be high in the coming weeks.