Norway: Core inflation not low enough to prevent a September hike? – Nordea

Erik Johannes Bruce, analyst at Nordea Markets, points out that the Norway’s inflation in August came in lower than Norges Bank’s forecast and somewhat lower inflation is not enough to prevent a September hike.

Key Quotes

“Core inflation in August came in at 2.1% y/y compared to 2.2% in July. Consensus was 2.2% and Nordea was 2.1%, while Norges Bank was 2.3%.”

“As expected, food prices fell sharply m-o-m and more than last year. That together with a prolonged summer sale on clothes is the main reason why core inflation fell.”

“Core inflation has now been 0.2% point below Norges Bank`s forecast for the last two months. That is - all else equal - an argument for a somewhat lower rate path in 2020, but not enough to change Norges Bank’s view for a September hike. Only a strong surprise to the downside in today’s Regional Network can prevent a September hike.”