The Nordic rate split, confirmed

2026-09-25 · What the week changed · What the week changed, The Nord Pool zonal split

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The weekly review: two Nordic central banks held, the euro-area print reaccelerated, and Nord Pool split into two markets — what a week of rate decisions changed.

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The Nordic rate split, confirmed

Friday's weekly review. Five rate calls to account for, a Nord Pool zonal split that broke wide open, and a euro-area inflation number that has firmly changed the shape of the European Central Bank argument.

What the week changed

On Monday the picture had Sweden potentially cutting again, Norway holding, and the European Central Bank's hike from the week before still an open story. By Friday, both Nordic central banks have delivered holds, the hike is no longer news but the setting, and the euro-area August print at three point two per cent has landed as a hard fact rather than a forecast.

The calls that resolved. Tuesday's call that the Riksbank cuts twenty-five basis points was a miss. The Riksbank's policy rate is 1.75 per cent — where it has sat since October last year — and that is what Wednesday's revised call said. The reason for the change of mind: the Riksbank's own published rate path already has rates at 1.75 in the third quarter of this year, drifting step by step up to about 2.42 by the end of next year. Tuesday's call ignored that path. Wednesday's call read it correctly. When a central bank has told you where it is going, do not fight the bank on the meeting where the path says hold. The next Riksbank meeting is the twelfth of November — that is where the path bends or it does not.

The three Norges Bank hold calls — Tuesday, Wednesday, Thursday — all hit. The bank held at 4.25 per cent. Norges Bank's next meeting is the fifth of November, which sits cleanly outside our fourteen-day window.

The map for six weeks. Sweden at 1.75, Norway at 4.25, the European Central Bank at 2.5 with the twenty-ninth of October in front of it. That is six weeks of settled Nordic policy. Nordea and DNB are supported inside that map, but the support is already in the price. From where I sit, we are not adding here.

The asymmetry to note. The Riksbank publishes a rate path. Norges Bank and the European Central Bank do not — Norges Bank's path exists only as a chart in its Monetary Policy Report, and the European Central Bank is explicitly meeting-by-meeting and data-dependent. When the Riksbank tells us where it thinks rates go, we can hold it to that. When Norges Bank moves, we are inferring. When the European Central Bank moves, we are guessing at what comes next. That is why an October European Central Bank surprise is more likely to move the crown-euro cross than a Riksbank surprise would, in either direction.

The inflation split explains the rate split. Norwegian August headline at 3.2 per cent, core at 3.5, both rising. Swedish headline flat at 0.3, core down two-tenths to 1.2. Finnish headline at 2.4 and core at 1.4, both drifting lower. Danish headline at 2.0, up four-tenths. Norway is hot and getting hotter, Sweden is cold, Finland tracks the euro area, Denmark is warming. The rate split is not policy preference — it is the mechanical response to the inflation prints. Our three midweek Norges Bank hold calls rested on Norwegian inflation rising rather than falling — the calls hit and the read has only strengthened since. Norwegian July unemployment came in at 4.2 per cent, down from 4.6 — a labour market getting tighter. It would take a real Norwegian disinflation event to force a cut before the fifth of November, and nothing in the recent data suggests one.

The European Central Bank. Euro-area August at 3.2 per cent, up three-tenths, with core down only a tenth to 2.4. Germany at 2.9, Italy re-accelerating to 3.2, Spain jumping seven-tenths to 4.6. Southern euro-area inflation is reaccelerating on services and food, and the Central Bank has already responded with the September sixteen hike to 2.5 per cent. My view is the European Central Bank stays hawkish into the twenty-ninth of October, and a further hike is on the table in a way the sell-side does not yet fully price. This morning's news that Isabel Schnabel is leaving the executive board reduces the odds of a big hike but does not remove the pressure. My read for October: a hold with hawkish language, or a cautious quarter-point hike, depending on how the German and French prints land ahead of it.

The Nord Pool zonal split

The Nordic market did not clear as one price this week. It split.

The western collapse. Denmark's zones and western Norway's zones fell between twenty-eight and thirty-seven per cent on the week — Norway zone two down thirty-seven, Denmark west down thirty-one and a half. The reason is Germany. When German wind runs, power spills north through the interconnectors. Denmark's western zone to the German-Luxembourg zone ran a net minus 222 megawatts on the week — negative means Germany is sending power into Denmark. Norway's zone two to the German-Luxembourg zone ran a net minus 564 megawatts. Norway is not exporting south; Germany is pushing north into Norway, and by a large margin.

The eastern firming. Finland pulled hard. The flow from Sweden's south-central zone into Finland more than doubled on the week, running at a net 593 megawatts. Finland's hunger dragged the Swedish south-central price up with it. The picture is two Nordic markets this week — a wind-flooded western half and a pull-driven eastern half.

The consequence. The Nordic hydro producers earn on Norwegian zone prices, which are soft — a soft revenue week for the hydro side. Nordic aluminium and paper buy power on the Finnish and Swedish south-central bids, which firmed. The marginal price-maker for the western Nordic zones this week is Germany, and Germany's wind is doing to our system what our hydro used to do to theirs. A slow structural shift, not a Friday event. The Finnish paper and forest names are most exposed to it — they buy at Finnish zone prices in a euro the European Central Bank is holding stronger than it would otherwise be. Two mechanical headwinds in the same direction. Nordic power-intensive industrials should be watched for margin compression through the autumn.

What we are watching next week

The American non-farm payrolls print on Friday the second of October — the input that sets the European Central Bank up for the twenty-ninth of October. A strong number keeps the Federal Reserve's cutting reluctance in place, drags the euro weaker, and imports inflation into the euro area at exactly the wrong moment. A weak number does the opposite. And the Nord Pool zonal picture — the split is expected to persist, western zones soft on German wind, eastern zones firm on Finnish pull.

Outcomes

Sources