Norway's core September inflation rate likely to be 3%

If there is a central bank amongst the G10 who can afford to sit back and relax in view of inflation close to or even above target then it must be Norges Bank. But it does not. It recently preferred to cut interest rates to support the economy, despite rising inflation levels.

Admittedly, the falling oil price does not create optimism as regards Norway's economic outlook. However, abandoning the inflation target of 2.5% threatens to cause more harm than help. Central bank governor Oeystein Olsen is even quite open about it. He expects inflation to peak at 3%. But he would not worry if it turned out to be slightly more. 

"New inflation data is due for publication today. The core rate for September is expected to reach 3%. It would not be surprising if this turned out to be 4% or 5% soon. It is questionable whether the market will then believe Olsen that the economy does not matter any longer and that he will now fight inflation. That means that NOK is facing tough times", says Commerzbank.