Norway’s Krone Slides as Inflation Boosts Case for Steady Rates

  • Annual consumer prices rise less than economists forecast
  • Krone set for biggest drop in three months versus euro

Norway’s krone tumbled after data showing inflation slowed more than economists predicted last month supported the case for the central bank to refrain from raising interest rates.

The Norwegian currency declined against all of its 16 major peers, headed for its steepest decline in more than three months versus the euro. Underlying consumer prices rose an annual 2.9 percent in September, the lowest rate in more than a year, according to a statement from Statistics Norway. That’s less than the 3.2 percent estimate in a Bloomberg survey of economists and compared with 3.3 percent in the prior month.

The krone has strengthened versus all except two of its major counterparts in the past month, as evidence that the economy of western Europe’s largest oil producer is on the mend spurs wagers that the Norges Bank will move away from its easing bias. While officials kept the main interest rate at a record-low 0.5 percent last month, they raised their policy outlook, fueling a surge in the currency that’s now reversing.

“It’s a bit of a knee-jerk reaction,” said Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London. “It doesn’t change the bigger picture in the longer term.”

The krone weakened 1.1 percent to 9.0819 per euro as of 8:57 a.m. London time, set for the biggest drop since June 27. It declined for a fifth consecutive day versus the dollar, depreciating 0.5 percent to 8.1291.

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