Norwegian core inflation comes in below Norges Bank’s projection in August

Norwegian core inflation came in below the central bank’s projection. But in the last months inflation has been coming in above the Norges Bank’s projections. Thus, the central bank is expected to conclude that inflation has been around as expected at the upcoming monetary policy meeting, stated Nordea Bank.

Norway’s core inflation came in at 0.9 percent year-on-year in August, as compared with June’s print of 1.2 percent. Norges Bank had anticipated inflation to have come at 1.1 percent, whereas consensus expectations were for the core print to have come in at 1.4 percent.

Food prices were the main surprise and the reason why the Norwegian core inflation dropped in the month. Food prices fell 3.4 percent sequentially. Food prices rose strongly in July and was expected to have come in at 1.3 percent sequentially, stated Nordea Bank. The surprisingly solid decline in food prices pulled down core inflation by 0.3 percentage points. Apart from this the picture was very close to expectations. Airfares dropped strongly on a month-on-month basis after a high July figure and slightly more than anticipated. However, the contribution to year-on-year growth was modest.

Food prices have been volatile in the last years possibly due to price competition. On a year-on-year basis, growth is now -1.7 percent. It is no surprise that food inflation has trended lower with the effect of a weaker NOK losing its grip. Still food inflation is unlikely to fall further. It is expected to rise sooner. According to Nordea Bank, the overall core inflation is expected to stay between 1 percent and 1.25 percent for a long period.

“After being on the upside some month’s inflation is now 0.2 percent points below Norges Bank’s forecast. The main conclusion will probably be that inflation has been about as expected”, added Nordea Bank.

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