Norwegian core inflation decelerates slightly in December, Norges Bank to stay on hold in near future

Norwegian core inflation slowed down in December, coming below Norges Bank’s forecast. On a year-on-year basis, the core inflation eased to 1.8 percent in December from November’s 2 percent. This downward movement signifies that the core rate is below the inflation target for the first time since October 2018, and a bit lower than Norges Bank’s expectations.

Looking at the subcomponents, food prices dropped because of Christmas season, as anticipated. Nevertheless, prices dropped less than in 2018, pulling core inflation up by 0.006 percentage points. Most of the other subcomponents contributed negatively.

Lower price growth of further and other household equipment were most noticeable, negatively contributing 0.08 percentage points to core inflation. Moreover, airfares rose comparatively less in 2019 compared to 2018, and culture and recreation items saw weaker price growth. Combined, these two subcomponents negatively contributed 0.07 percentage points to core inflation.

“Today’s inflation figure is the first since Norges Bank published its latest Monetary Policy Report. It is therefore too early to draw strong conclusions, but today’s inflation figure should not significantly affect the central bank’s interest rate outlook. In sum, this is consistent with our view that Norges Bank will remain on hold for the foreseeable future”, stated Nordea Bank in a research report.