Norway’s Inflation Jumps More Than Expected to 13-Year High
(Bloomberg) -- Norway’s inflation accelerated more than expected last month to the fastest pace in 13 years on soaring electricity prices, adding urgency to government’s plans for subsidies to cushion the effect for consumers.
Headline inflation rose to 5.1%, the highest level since October 2008, with electricity prices contributing 3.3 percentage points, Statistics Norway said on Friday. The reading was higher than all estimates in a Bloomberg survey of economists, which had a 4.6% median. Norges Bank, which is due to decide on rates next week, expected inflation at 3.9% in its September projection.
The data adds to the picture of Norway’s robust recovery outpacing most its rich peers and of growing labor shortages, while an energy price crisis in Europe is boosting power prices and denting the purchasing power of Norwegians.
Still, with relief measures expected from the government, the central bank’s decision next week will mainly focus on the uncertainties linked to the omicron virus strain and the risk of more restrictions, according to Svenska Handelsbanken’s economist Marius Gonsholt Hov.
Following the lead of other European nations, the government of Premier Jonas Gahr Store is planning to increase housing benefits by 1,500 kroner ($167) per household from December until March for a total cost of 500 million kroner, public broadcaster NRK reported earlier this week. Each person in those households will be paid an additional 150 kroner, it said, citing Local Government and Regional Development Minister Bjorn Arild Gram.
Read More: Norway Plans Action to Cushion Homes From Energy Crisis
The growing wage pressures and higher electricity prices spilling over to other costs suggest underlying inflation, the measure followed by the central bank, will be accelerating after growing 1.3% in November, Swedbank’s economists said in a note to investors. The central bank could lift its inflation projections next week and possibly see core prices returning to 2%-target before end-2024, they added.
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