Norway’s inflation slows slightly in May; at par with Norges Bank’s projections

Norway’s consumer price index in May rose 0.3 percent m/m and 3.4 percent y/y, according to Statistics Norway. Meanwhile, the core inflation, excluding energy products, slightly slowed down to 3.2 percent in May from April’s 3.3 percent. Consensus projection was for 3.1 percent. Core inflation was at par with Norges Bank’s projections. Lower food inflation mainly led to deceleration of core inflation to 3.2 percent. However, the prices didn’t decline as sharply as was projected by Nordea Bank.

Airfares grew strongly by 27 percent m/m, but on a year-on-year basis, there was not much change registered. This pushed up core inflation on an annual basis by almost 0.3 percentage points. Meanwhile, core prices of imported goods remained unchanged at 4 percent y/y. Interestingly, rents declined 0.1 percentage points, whereas on an annual basis it slowed down.

Inflation in Norway has remained slightly above the target for certain period of time; however, it is impacted by the earlier depreciation of NOK. Moreover, the subdued outlook of the Norwegian economic growth is of more concern for the central bank, said DNB Bank in a research report. This is likely to make the Norges Bank lower its benchmark rate further.

However, Friday’s inflation figure does not change the view that it will decelerate in the near term, said Nordea Bank in a research report. Inflation is likely to slow in the second half of this year when the impact of weaker krone wanes away, added Nordea Bank.