Fast Comment NorwayPreview: CPI-ATE in January expected to run above Norge Bank’s estimate

Next week we will see figures for core inflation in January, as measured by CPI-ATE. As a reminder, CPI-ATE eased just slightly in December to 2.1 percent from 2.2 percent in November. The outcome was slightly above our and the consensus estimate (2.0 percent), while the deviation was a bit larger versus Norges Bank (1.9 percent). More importantly, we believe the deviation extended into January and we forecast that CPI-ATE rose to 2.3 percent (Norges Bank forecast: 2.16 percent). The expected rise is underpinned by a base effect. Last year we saw price declines in January that were a bit larger than usual, something we do not believe was repeated this year. To sum up, we believe the CPI-ATE will continue to hover somewhat above Norges Bank’s short-term estimates. The deviation is not large, but it adds to our expectation of a rate hike in March. Finally, headline CPI may receive some additional media attention, as it is currently boosted by a sharp rise in electricity prices. However, with inflation expectations well anchored, Norges Bank can - in the sense of fulfilling its inflation mandate - continue to look past the steep increase in headline CPI.