Norwegian core inflation accelerates in February, Norges Bank likely to hike interest rate in September

Norwegian core inflation accelerated in the month of February. Core rate rose to 1.4 percent year-on-year from January’s 1.1 percent. This is above consensus expectations of 1.3 percent, whereas it was below central bank’s projection of 1.7 percent.

The main surprise was food prices which pulled up the core rate by 0.1 percentage point. That is most likely a lasting effect. Producers are adjusting up their prices in February. Moreover, airfares rise above expectations, pulling up core as much as 0.3 percent. Partly at least this might be more temporary, noted Nordea Bank in a research report.

As anticipated, clothes did not recover from the low January level but actually fell more. That signifies a stronger recovery in March. Furthermore, early sale on books pulled down the core rate. Core inflation without the books, cloths and airfares came in at 1.7 percent. According to Nordea Bank, March figure is expected to come in at 1.6 percent.

“Norges Bank will not change view on inflation looking ahead based on temporary low prices on clothes and books. With the strong labour market figures we now expect the coming rate path to have a full hike in September. We also believe Norges Bank will actually hike in September”, added Nordea Bank.

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