Norwegian core inflation rises above expectations in December

Norwegian core inflation surprised on the upside in December and the surprise was widespread. Core rate came in at 2.1 percent year-on-year, down from 2.2 percent in November. The consensus expectations were for 2 percent, whereas Norges Bank had expected a rise of 1.9 percent. On a year-on-year basis, the consumer price inflation came at 3.5 percent, the same as prior month.

As expected, the year-on-year growth in airfares and food decelerated and pulled down the core rate by 0.3 percentage points. The reason for the 2.1 percent figure was partially that the price cuts on clothes and shoes was more moderate than last year and a surprisingly solid rise in prices on furniture etc. However, most other consumer group also showed a modest price rise.

Given the surprise being widespread and not based on the usual suspects this figure is seen as an indication that price pressure in the economy could be higher also looking ahead, noted Nordea Bank in a research report.

“Norges Bank will hike in March. Of course, financial unrest and lower expected rates abroad will be taken into account when the new rate path is made in March. But domestic figure is well in line and inflation even on the upside”, added Nordea Bank.