Denmark’s inflation likely to exceed 1% by late 2016

In March, inflation in Denmark remained unchanged, the second-lowest reading since observations on monthly basis began in late 1960’s. March’s figure was below consensus forecast of 0.3%. Inflation figures for March are likely to mark the bottom, according to Nordea Bank. Inflation from April is expected to begin accelerating higher as the base effects from the lower prices begin to fade away, added Nordea Bank.

Lower oil prices continue to be mainly responsible for the unusual low inflation figures. Although gasoline prices increased a bit last month, transport subtracted 0.2 7 percentage points from the y/y CPI figures. Moreover, footwear and clothing, and food contributed negatively to the inflation figures. Meanwhile, miscellaneous goods and services contributed 0.26 percentage points to the overall inflation numbers. But core inflation decelerated to 0.5% in March from February’s 0.8%.

“Under the assumption that oil prices will increase to around USD 50 at the end of 2016, we expect Danish inflation to exceed 1.0% at end-2016”, noted Nordea Bank.