Norwegian core inflation likely to have accelerated in January

Norwegian inflation data for the month of January is set to release early next week. According to a Nordea Bank research report, core inflation is likely to have accelerated to 2 percent year-on-year, a rise from 1.8 percent in December 2019. However, this would be below Norges Bank’s forecast of 2.2 percent.

The likely rise in core inflation is probably due to lower discounts on apparel and furniture prices relative to last year. Transportation costs are also expected to have fallen less after the holiday season than they did last year. Meanwhile, rents are likely to rise only slightly in 2020.

“Last month, core inflation was a tenth below Norges Bank’s forecast and we believe that January's figure will also end up below their forecast. If we turn out to be right, two consequent months with core inflation below Norges Bank’s forecasts would weigh negatively on the rate path. The isolated effect is not huge though, we are talking about some 5 bp downward revision to the rate path”, added Nordea Bank.