Norwegian core inflation accelerates in December

Core inflation in Norway accelerated in December as expected. Inflation rose to 1.4 percent from 1 percent. Consensus expectation was 1.2 percent, while Norges Bank had expected 1.3 percent. The jump in the inflation figure was driven by volatile and temporary factors as food prices and airfares. The sales during Christmas were less on food in 2017 than the year before and added 0.2 percentage points to the lift. Airfares prices added 0.3 percentage point as the Christmas weekend was included in the numbers this year and not in 2016.

The figure was 0.2 percentage points higher than the consensus expectations and therefore was a surprise to the market. Even if temporary factors were the main driving force behind the surprise, EUR/NOK dropped to 9.61 on the release.

“Today’s figure should not change the view of Norges Bank since the jump was not driven by fundamental factors. The real test will come the next couple of months, where both the central bank and we expect a further uptick in inflation on the backdrop of the weakening of NOK last year”, stated Nordea Bank in a research report.

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