Norway: Inflation nearly on target – Nordea Markets

Erik Johannes Bruce, Research Analyst at Nordea Markets, notes that Norway’s core inflation in August came in at 1.9% y/y from 1.4% last month, as Nordea and consensus was 1.7% while Norges Bank’s forecast was 1.5%.

Key Quotes

“As expected it was food prices which pulled up core inflation y-o-y by dropping less than last year m-o-m. It pulled up core close to 0.3% points.”

“One should always be careful with drawing too strong conclusion on one Norway CPI figure especially now with prices affected by the timing of the seasonal sale both on clothes and furniture etc.”

“Remember also that we were generally surprised on the downside in the first part of the year. Still today’s figure is in line with our view. Core inflation will be in a range between 1.5 and 2% in the second part of 2018.”

“Core now close to target and 0.4% above Norges Bank’s forecast after being 0.2% point above in July of course is in line with the September hike. But more important it also argues for an upward revision of the path.”

“Based on Norges Bank’s reaction function described in the interest rate account in the Monetary Policy Reports it could argue for a next hike already in December. However the Board might think this too aggressively preferring to raise the path further out with more hikes in 2019/ 2020.”