Things are strange, at least for Norges Bank. While other G10 central banks have to cope with (too) low inflation and relatively healthy growth, Norges Bank has to deal with (too) high inflation and (too) low growth. Today's GDP data for the second quarter will once again underline this problem.



With oil and gas being main pillars of growth, the Norwegian economy is suffering particularly strongly from the oil price slide. At the same time, hydropower is one of the most important sources of energy in Norway, which is why the low oil prices do not dampen inflation as much as in other countries.



And finally, manufacturing has not taken the necessary measures to increase competitiveness due to the oil boom of the last few years. That is why the mainland economy is unable to buffer the dip in the oil and gas sector.



"While the economic slowdown is an argument for another rate cut, the uptrend in inflation sets the bar high. Moreover, low interest rates threaten to push economic imbalances like a real-estate bubble", says Commerzbank.



Norges Bank will rely on a weak krone to improve the price competitiveness of Norwegian companies and support the necessary structural economic and labour market adjustments. In fact, the news on this score are encouraging, EUR-NOK has broken the 9.24 level and might break through 9.25 it if the GDP data for the second quarter disappoint the markets today.