Inflation data unlikely to influence Norges Bank's March rate path

Norway January core inflation came in at 3.0 %y/y inline with Norges Bank forecast and consensus. Headline inflation increased to 3% from 2.3% last month. Data is unlikely to influence Norges Bank's March rate path. Norges Bank seems more focused on the crude price and the still-developing second-round effects of previous falls.

Data showed that food inflation did not pick up after the strong price cuts before Christmas, it actually fell further. Also electricity price pulled up headline inflation much more than expected. It is also worth mentioning that growth in rents slowed further as expected.

On the other hand the price cuts on clothes were very moderate, -4.9% m/m compared to -7.4% last year. That could possibly be an effect of the past NOK weakening in which case it is more lasting. But it could also indicate a late start of the winter sale in which case price growth y/y will fall in February.

"Lower food inflation and lower growth in rents which could indicate that core inflation in Norway has peaked. A rise in price growth on clothes, which is the reason core did not ease, could be temporary" said Nordea Bank in a report.