Nomura Research now expects Norges Bank to deliver one more policy rate cut in December 2026, taking the rate to 3.75%. This follows Norway’s higher-than-expected January inflation and stronger wage growth. In January, CPI-ATE inflation rose by 0.3pp to 3.4% year-on-year. That was higher than the 2.9% forecasts from both Nomura and Norges Bank, and above the 3.0% consensus. CPI inflation rose by 0.4pp to 3.6% year-on-year, versus 3.2% (Nomura), 2.7% (Norges Bank), and 3.0% (consensus). Nomura expects wage growth to keep inflation sticky into 2026, even if wage growth slows over time. On this view, a 3.75% policy rate would still sit above Norges Bank’s long-run neutral range of 2.25% to 3.50%. One risk is the Norwegian krone’s recent strength against the US dollar and the euro, which could reduce imported inflation. Nomura says it has already built in slower goods price growth and still expects inflation to ease gradually, leaving room for one remaining cut. Given January 2026’s inflation surprise, we need to adjust our strategy for the weeks ahead. Underlying inflation came in at 3.4% and headline inflation at 3.6%, both well above our forecast and Norges Bank’s. This suggests price pressures are not easing as expected, and it calls for a rethink of the likely rate path. Sticky inflation is also backed by strong wage growth. In 2025, wage settlements averaged above 5%, and that strength appears to be carrying into 2026. This points to inflation staying higher for longer than we previously assumed. As a result, the market should not expect several rate cuts. Instead, it should prepare for one cut, pushed back to around December 2026. For interest rate traders, this implies that products pricing cuts in summer or autumn 2026 no longer fit the data. Consider paying fixed in Norwegian interest rate swaps, or selling forward rate agreements for the second half of the year. The 2-year Norwegian government bond yield, now around 4.1%, is likely to face upward pressure as markets reprice toward a more hawkish outlook. In FX, this supports a bullish view on the Norwegian krone. If Norges Bank holds rates at 4.0% for most of the year while other central banks (such as the ECB) are cutting, the NOK’s carry appeal improves. Further NOK strength looks possible, especially in EUR/NOK, which has already fallen from above 12.00 in mid-2025 to around 11.25 today. For equity derivatives, higher-for-longer rates are a headwind for the Oslo Børs OBX Index. Higher borrowing costs can squeeze margins, which can make bearish positions more attractive. Consider buying OBX put options either as a hedge or as a directional trade if the market reacts to tighter-for-longer policy. The main risk to this view is the krone’s own strength. A stronger NOK can lower inflation by making imports cheaper. While NOK has recently gained against the dollar and the euro, this disinflationary effect may not be strong enough to offset domestic drivers in the near term. We should track import price data closely, but keep the base case that rates stay high.

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