Norwegian core inflation has come in line with the projection of Norges Bank. However, inflation is still much below target so the central bank is expected to stay on hold for a long period, noted Nordea Bank in a research report.
Core inflation in Norway came in at 1.2 percent in year-on-year in July, down from June’s 1.6 percent. Consensus expectations was 1.2 percent, while Norges Bank’s projection was 0.8 percent. The scenario this time was different than anticipated. Prices on clothes and shoes pulled down inflation considerably more than expected. It added 0.3 percentage points to the decline. On the other hand both prices on airfares and food remained the same.
Core inflation 0.4 percentage points above Norges Bank’s forecast is sufficient to have an impact on the rate path. According to Norges Bank, inflation is expected to pick up to 1.1 percent in August. The hap is expected to narrow. But inflation is far below target, and changes in the rate path are not about increasing the possibility for a hike short term, stated Nordea Bank.
“If Norges Bank should raise the path, it would happen in the longer end of its rate path, and moving the timing of a hike somewhat closer in time. The current path indicates a hike in late 2019”, added Nordea Bank.
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