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 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.