Prewarning Norway inflation-close to 3% again

Norway November inflation will be published 10 December at 10:00. Economists forecast a moderate slowdown in inflation from 3.0% in October to now 2.9%. Forecast is close to Norges Bank's forecast at 2.96%, but marginally below consensus at 3.0  or 3.1%.

"We have seen reports indicating that food prices slowed further in November after a slowdown also last month that is why we are somewhat on the low side to consensus.  Apart from that we do not expect big changes, weak NOK means continued high inflation despite the slowdown in wage growth", Nordea Bank.

The last days' drop in oil prices and the sharp depreciation of NOK has created more fuss about the already hot debated question of whether Norges Bank will cut rates in December or not. NOK is currently more than 5% weaker than forecasted by Norges Bank which means it is in no hurry to cut rates. Unchanged in December is also in line with its own interest rate forecast from September.

Oil prices are close to 10% lower than expected pulling in the opposite direction. Based on previous reactions on similar moves we would judge the downward effect from lower oil prices to be less than theupward drag from weaker NOK.

"We expect Norges Bank to be on hold in December. Of course there are other factors to take into consideration. The 2016 fiscal budget implies much stronger growth in public demand next year which all else equal argues for an upward revision to growth. On the other hand money market spreads are on the high side, bank's funding costs are increasing and current growth might be somewhat on the weak ",added Nordea Bank.