Norwegian Inflation Unexpectedly Slows Ahead of Rate Meeting

(Bloomberg) --

Norway’s inflation unexpectedly slowed in August, raising doubts as the central bank prepares to raise interest rates again as soon as next week.

Annual underlying inflation was 2.1% in August, missing the 2.2% predicted in a Bloomberg survey of economists. The central bank had forecast an annual pace of 2.3%.

Key Insights

• Headline inflation slowed to 1.6%, pulled down by falling consumer goods and food prices.
• In June, Norway’s central bank raised rates for a third time in less than a year to cool an economy that has been stoked by surging oil investments.
• Underlying inflation has kept above the central bank’s target of 2% since the end of last year, and the bank predicts price growth will be 2.4% in 2019, according to its June monetary policy report.

What Economists Say

• “Clearly a weaker print than expected, but I still think the Regional Network Survey is far more important for Norges Bank as we saw back in June even if inflation is likely to be a negative factor for the rate path” on Sept. 19, said Kristoffer Kjaer Lomholt, senior analyst at Danske Bank.
• “An argument for a somewhat lower rate path in 2020, but not enough to change Norges Bank’s view for a September hike,” said Erik Bruce, senior economist at Nordea.
• “On the margin, this supports our view that Norges Bank will keep rates on hold at the meeting next week,” said Jeanette Strom Fjaere, an economist at DNB.
• “Today’s lower than expected inflation print really underpins our view that the September hike is likely to be the last one in this cycle,” said Kjetil Martinsen, an economist at Swedbank.

Market Reaction

• The Norwegian krone weakened 0.2% against the euro to 9.877 at 8:41 a.m. in Oslo.

Get More

• For more details on inflation, see this table.

To contact the reporter on this story: Sveinung Sleire in Oslo at ssleire1@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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