Norwegian core inflation accelerates in July, Norges Bank likely to hike interest rate in September

Norwegian inflation surprised on the upside to Norges Bank’s forecast in July. Core inflation accelerated in the month to 1.4 percent from 1.1 percent on a year-on-year basis. Consensus and Norges Bank’s expectations were for 1.2 percent.

The acceleration in inflation was mainly due to food prices that surged much more in July. Moreover, prices on clothes and shoes were cut less than last year and that prices on furniture’s etc rose sharply.

An interest rate hike in September is even more likely following today’s figure being 0.2 percentage point above Norges Bank. It also affirms the belief in inflation hovering around 1.5 percent in the second part of 2018, noted Nordea Bank in a research report.

Sharper hike in food price sequentially now argues for weaker next month even if a dry summer could push up some prices in the months ahead.

“We think Norges Bank will think the same. Norges Bank has 1.5 percent as August forecast. We find it likely that we end up close to that. Possibly somewhat on the upside but not by 0.2 percent as this month”, added Nordea Bank.