Norwegian core inflation decelerates in October

Norwegian core inflation decelerated in October. Core rate slowed to 1.6 percent on a year-on-year basis from September’s 1.9 percent. October’s print is in lie with Norges Bank’s expectations. Consensus expectations were for 1.8 percent.

The total consumer price index rose 3.1 percent year-on-year in the month, slightly below consensus expectations of 3.4 percent. Electricity prices dropped 3.8 percent.

On a sequential basis, food prices fell 0.8 percent, a bit more than the average drop in September. Last year food prices had risen 0.3 percent. Moreover, air fares had risen significantly last year and were just moderately higher in October 2018. Prices on furniture and household equipment dropped more than normal for October.

Prices for imported goods were up 1 percent year-on-year in October, up from 1 percent year-on-year in September. Other core prices were up 1.9 percent year-on-year, compared to 2.4 percent in October.

In spite of the higher-than-expected inflation, core inflation came in line with Norges Bank’s projections. The decline was mainly a base effect where prices on food and air fares rose more than normal in October last year. Import price inflation was up but was more than offset by declining domestic inflation.  

“Today’s number brings core inflation back to Norges Bank’s inflation path and hence still support our view that Norges Bank will be able to hike the policy rate two times in 2019, with the first hike expected in March. Arguments for gradual rate hikes are still present and a December hike remains off the table in our view”, stated DNB Markets in a research report.