Norway’s inflation accelerates above expectations in February on higher food and air prices

Norway's core inflation accelerated to 3.4% in February, as compared with 3% in January and consensus expectation of 3.1%. Food prices grew 3.4% m/m, accelerating core inflation on year-on-year basis by 0.2 percentage point. Food prices are usually revised up in February, but this is the strongest rise on record.

Norway's food inflation is 3.2% y/y, still lower than November's 3.8%. Apart from food prices, a strong increase in air prices also helped accelerate inflation on year-on-year basis by between 0.1 and 0.2 percentage points. This is expected to be reversed in March.

The rise in food prices is probably more lasting, but the air prices are expected to be reversed. Nevertheless, at the next week's Monetary Policy meeting, the slightly higher inflation will be mentioned. This is the only factor since the December report that can slightly argue for a rise in increase rate. However, the central bank is expected to go for a rate cut and a lowering of the rate path.