The USD/NOK currency pair retreated for a third straight trading day on Wednesday ahead of the outcome of Norges Bank’s policy meeting and as the latest US CPI inflation data added to expectations of an interest rate cut by the Federal Reserve in September.

Annual headline consumer inflation in the US remained stable at 2.7% in July, against expectations of an acceleration to 2.8%.

But, annual core CPI inflation picked up to 3.1% in July from 2.9% in June, exceeding market consensus.

Markets are now pricing in a 90% chance of a 25 basis point rate cut in September, with one more cut expected by year-end.

Meanwhile, Norges Bank is expected to keep its key policy rate on hold at 4.25% at its August 14th meeting.

In June, Norges Bank lowered borrowing costs by 25 basis points to 4.25%, confounding market consensus of a hold.

The central bank has kept rates at a 15-year high of 4.50% since December 2023.

Norges Bank said it might deliver more rate cuts by the end of this year, in case the economy developed as expected.

Yet, it cautioned that heightened uncertainty prevented it from committing to a particular rate path.

The USD/NOK currency pair was last down 0.33% on the day to trade at 10.1862.