Inflation risks may prevent Norges bank from cutting rates further

Norway's consumer price data for June is scheduled to release today. Since mid-2014 inflation has stood at roughly 2%. Underlying inflation has even reached 2.4% now and is therefore close to Norges Bank's target of 2.5%. 

According to Commerzbank, "Contrary to the majority of other industrialised nations Norges Bank is therefore faced with the problem that if it was to lower interest rates further it may even overshoot its inflation target. So should today's data surprise on the upside this would raise the bar for a further rate cut, as the recent relatively pronounced NOK weakness is also increasing the risk of inflation. Even if the central bank is currently more worried about the economy in view of the low oil price it is unlikely to completely ignore inflation. In this context the NOK weakness is helping Norges Bank and may well constitute a good reason to leave rates unchanged for the time being."