Norway core consumer price inflation falls in line with expectations; Norges Bank likely to adopt rate hike in September

Norway’s core consumer price inflation remained well below target, while headline inflation is lifted by higher electricity prices. The drop in core inflation in June was as expected by Norges Bank and does not change the interest rate outlook.

"We continue to expect a rate hike in September, which was also clearly communicated by Norges Bank in June," according to the latest report from DNB Markets.

The upturn in the Norwegian economy is continuing and Norges Bank has made clear it is willing to accept temporary low inflation as long as the real economy is improving and there is outlook for increasing wages and prices ahead. Besides, we get to more monthly inflation observations before the next MPR in September (the August meeting is without MPR or new forecasts).

Core inflation (CPI-ATE) was 1.1 percent y/y in June, down from 1.2 percent in May. Consensus expected 1.1 percent according to Bloomberg and Norges Bank projected 1.1 percent in the June MPR. Prices for imported goods rose 0.4 percent y/y as in May. Other core prices rose by 1.5 percent, compared to 1.6 percent in May.

 Meanwhile, the total consumer price index rose by 2.6 percent y/y in June. Consensus expected 2.4 percent, while Norges Bank forecast 2.3 percent.