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Fast Comment NorwayCore inflation well below Norges Bank’s short-term estimates

  1. CPI-ATE at 1.4 percent in Feb, as we had expected
  2. Consensus was for 1.3 percent, while Norges Bank forecast 1.7 percent
  3. CPI-ATE has remained around 0.3 p.p. below Norges Bank's short-term estimates for Jan and Feb
CPI-ATE rose 1.4 percent in Feb, as we had expected; well below central bank estimate of 1.7 percent
Core inflation, as measured by CPI-ATE, rose to 1.4 percent in February, from 1.1 percent in January. The outcome was as we had expected, while it was slightly above the consensus estimate of 1.3 percent. However, we admit it was a weak 1.4 percent: CPI-ATE was 1.35 percent before rounding. The key point, however, is that the core inflation rate continued to be well below Norges Bank’s short-term estimates. In its December Monetary Policy Report, Norges Bank said it expected CPI-ATE to rise 1.4 percent in January, increasing to 1.7 percent in February. In other words, near-term price developments have stayed around 0.3 p.p. below the central bank’s forecasts.
The details: Transport prices contributed to the rise in CPI-ATE in February
Digging into the details a bit, we see that transport prices in particular contributed to the rise in CPI-ATE in February. The price of food and furniture also gave a boost, although a smaller one than from the transport component. Other price components were, overall, a slight negative (in y-o-y terms). Taking a broader perspective, prices for domestically-produced goods and services have varied around Norges Bank’s short-term estimates, as shown in the second chart below, but prices for imported consumer goods have been substantially lower than expected by the central bank.
Norges Bank's rate path subject to upward and downward pressure
Summing up, the starting point for core inflation was significantly below Norges Bank’s expectations and this will, in isolation, pull the rate path downwards. However, other factors, such as higher international rate expectations and an improved growth outlook, are pushing the rate path in the opposite direction. We will return shortly with a Macro Comment on our expectations for Norges Bank.


Marius Gonsholt Hov

Senior Economist


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