Norwegian inflation rose a bit in April but continues to be below Nordea Bank’s forecast. Therefore, there is uncertainty regarding the September hike. Core inflation came in at 1.3 percent year-on-year, a rise from 1.2 percent in the prior month. Consensus expectations were for the inflation to come in at 1.4 percent, whereas the central bank had anticipated a rise to 1.6 percent.
The prices on clothes and shoes were the main surprises. They did not recover and fell 5.3 percent year-on-year. The weakening of NOK through 2017 argues for higher price growth on shoes and clothes. There is still some Easter-related noise which will impact year-on-year growth in May. Airfares and food prices might pull in different directions. Moreover, it is difficult to believe the drop in clothes and shows would last, even though the belief in a recovery soon has diminished. Core inflation outside food, airfares and clothes and shoes in close to 1.7 percent.
Inflation continues to be 0.3 percent below the central bank’s forecast. If the gap remains in the May figure, it would, all else equal, pull down the rate path in the June report. Moreover, the unemployment figures have been slightly on the weak side.
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