Norwegian core inflation likely to have stayed unchanged in July

Norwegian inflation data is set to be released this week. According to a Nordea Bank research report, core inflation in Norway is expected to have remained unchanged at 1.1 percent year-on-year from last month. Consensus and Norges Bank’s forecast is at 1.2 percent. The headline inflation is likely to have come in at 2.8 percent up from 2.6 percent last month.

The development in the summer provides no reason for the central bank to alter view on monetary policy. Retail sales were subdued in June, but given the extraordinary nice summer weather it should be no reason for worry that consumers preferred the beach to the shopping center.

Price cuts have been rather solid in 2018. Moreover, a slightly slower rise in airfares on a sequential basis is expected than last year. Food prices are another major uncertainty in 2018. They are usually upwardly revised rather strongly in July and that is believed to be the case in 2018 as well.

“The big question is whether inflation will pick up to 1.5 percent in August as Norges Bank forecasts. We think the case for higher inflation in August is strong with food inflation rebounding strongly due to very strong price cuts last year”, stated Nordea Bank.