Norwegian inflation likely to have risen in April, Norges Bank to hike in September

Norwegian inflation is expected to rise in the month of April, closing most of the gap to Norges Bank’s projection. Statistics Norway is set to publish April inflation data next week. According to a Nordea Bank research report, core inflation is expected to have risen to 1.5 percent year-on-year from 1.2 percent in the prior month. The central bank expects the core rate to come in at 1.6.

In March, inflation had come 0.3 percentage points below Norges Bank’s projection and lower than expected inflation was mentioned as main downside news at the May Norges Bank meeting. But the central bank was positive on inflation looking ahead.

Last year’s NOK weakening, higher wage growth and higher capacity utilization all indicates towards higher inflation. There appears to be a good reason for the gap to diminish or even close already in the April figure, stated Nordea Bank.

However, there are some factors that will hold back inflation in the month. Firstly there is an opposite Easter effect on airfares compared to food. Prices rose solidly last April in connection to Easter.

“We hold on to our view. Inflation will be between 1 ½ and 1 ¾% the rest of the year, close to Norges Bank’s forecast. That is one reason why Norges Bank will hike in September”, added Nordea Bank.

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