Norwegian inflation likely to have accelerated slightly in August – Nordea Bank

Norwegian inflation is expected to have accelerated slightly in August, while the gap to Nordea Bank’s forecast will narrow, noted Nordea Bank in a research report. Thus, the figure should not give any reason to anticipate a major change in monetary policy. According to Nordea Bank, core inflation is expected to have accelerated to 1.3 percent year-on-year from 1.2 percent last month. In its June monetary policy report, Norges Bank had anticipated core inflation of 1.1 percent.

The question this time is whether airfares and food prices would fall sharply on a sequential basis after the very high levels in July as they did in 2016. This is likely, and therefore, core inflation is expected to have risen moderately year-on-year.

“We are relatively comfortable with our view that the seasonal pattern on these items have changed the last years and that we will see such a correction. But we have to warn that if these prices should remain at July levels core inflation will increase strongly y-o-y (1.8 percent)”, stated Nordea Bank.

In the mentioned case, September MPC meeting would be very interesting with both capacity utilization and inflation evidently on the solid side to Norges Bank’s forecast. However, if the forecast is realised, inflation would be just 0.2 percentage points above Norges Bank’s forecast after a gap at 0.4 percentage points in July. Therefore, inflation would not have a major impact on the coming rate path, said Nordea Bank.

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