Norway inflation likely to fall short of Norges Bank’s forecast
Norges Bank foecasts end 2016 core inflation, CPI ATE, will be at 2.2%. The NOK weakening through last fall is now starting to feed into inflation figures, but in 2016 this effect will disappear. Domestic inflation will …
Norges Bank foecasts end 2016 core inflation, CPI ATE, will be at 2.2%. The NOK weakening through last fall is now starting to feed into inflation figures, but in 2016 this effect will disappear.
Domestic inflation will also fall as a result of lower wage growth. Then low inflation can be a problem in Norway.
Nordea Research notes ....
Our view on inflation is that there is significantly downside risk to key rates in the longer term even if Norges Bank, as forecasted, cuts to 0.75% this year. For now this remains a risk.
We forecast higher oil prices and with better growth outlook we think Norges Bank will see low inflation as temporary, thus not cut rates further from the 0,75% level.
The NOK adds to the downside risk as NOK could strengthen more than expected when Norges Bank signals that they are done cutting rates.
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