Norwegian Krone: NATO's Stoltenberg to Fight "Battles on Multiple Fronts" at Norges Bank

• NATO Secretary General to head Norges Bank
• After seeing off a crowded field of candidates
• Set to take post at Norges Bank in December
• Economists expect continuity in policy stance

Press conference by Jens Stoltenberg, Secretary General of NATO, following his meeting with Dimitar Kovacevski, Prime Minister of North Macedonia.

Norway’s Krone has largely overlooked an announcement that current North Atlantic Treaty Organization (NATO) Secretary General Jens Stoltenberg will soon lead the Norges Bank, although one economist said this "is not the most logical of appointments".

Norway’s Krone beat a retreat from the U.S. Dollar, Pound Sterling and a range of other currencies in a Friday trading session that was marred by further declines for stock markets across the world.

The currency displayed little obvious reaction to the announcement that from December 01 the currently serving NATO Secretary General Jens Stoltenberg will take the reins of the Norges Bank.

"On behalf of Norges Bank, I would like to congratulate Jens Stoltenberg on his appointment as Governor of Norges Bank. I know Mr Stoltenberg to be an engaged and competent economist. I am certain that with his broad experience he will successfully fill this role", says Governor Øystein Olsen.

"Mr Stoltenberg cannot take office until around 1 December. But I know that Norges Bank will be in safe hands under the leadership of Deputy Governor Ida Wolden Bache from 1 March", says Governor Olsen.

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When not engaged with military matters, Stoltenberg is a keen economist who has a reportedly enthusiastic interest in numbers and has seen off a crowded field of around 22 other candidates to clinch the top job at the Norges Bank.

His appointment comes just days ahead of the expected retirement of current Governor Øystein Olsen, which was announced in August 2021 but will not take effect until after an annual address scheduled for February 17.

However, the incoming governor is not expected to take up his post until December 01 when his time as NATO Secretary General comes to an end, which will leave Deputy Governor Ida Wolden Bache to steer the Norges Bank ship in the interim.

“The fact that the Norges Bank is charged with promoting financial stability, as well as the more standard task of keeping inflation in check, means that he will face battles on multiple fronts,” says David Oxley, a senior Europe economist at Capital Economics.

“The bigger picture is that we don’t think the arrival of Mr Stoltenberg will mark a radical departure in the direction of travel for policy in Norway, not least because further rate hikes are already baked into the Bank’s near-term plans,” Oxley also said on Friday.

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Oxley and colleagues opined on Friday that this “is not the most logical of appointments,” given that the bank is in the middle of monetary policy tightening cycle and because this is likely to take place largely under the leadership of Deputy Governor Ida Wolden Bache.

Wolden Bache was also a candidate for the post and a favourite among financial market participants and observers.

“We would have thought that Ms Wolden Bache’s impressive credentials and status as the continuity candidate would have worked in her favour,” Oxley and colleagues wrote in a Friday note to clients.

The Capital Economics team sees the Norges Bank as likely to lift its cash rate each quarter this year, taking the benchmark up to 1.5%, under the leadership of Wolden Bache and has also penciled into its forecasts a further two 25 basis point increases in interest rates for next year.

While economists have long anticipated that Norges Bank would lift its benchmark interest rate to 1.5% in 2022, the latter two increases expected by Capital Economics have not been factored into market pricing and so would be a prospective source of upside for the Norwegian Krone along the way.

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