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Fast Comment NorwayPreview: core inflation in November pulled up by base effects; neutral to Norges Bank

  1. CPI-ATE expected at 1.8 percent in November, up from 1.6 percent in October; driven by a base effect
  2. Matching Norges Bank's estimate
  3. Even a slight surprise to the upside would be neutral to the key policy rate path
We expect the CPI-ATE at 1.8 percent in November, up from 1.6 percent in October
Core inflation, as measured by the CPI-ATE, corrected sharply downward in October. By dropping to 1.6 percent y-o-y, down from 1.9 percent in both August and September, the outcome landed well below the market consensus of 1.8 percent. However, the outcome matched Norges Bank’s estimate exactly. We expect the annual rate rose again in November, to 1.8 percent, which matches Norges Bank’s estimate. All told, we believe core inflation has behaved according to Norges Bank’s near-term projections and thus should be a neutral element to the upcoming policy rate path (December 13). There is a significant base effect that should pull up the annual rate in November. Recall that core prices fell by 0.3 percent m-o-m in November last year, which was significantly below the historical average for November. Typically, price changes have been around zero percent m-o-m. Even though Black Friday and other sales campaigns may have suppressed prices this November, we see scope for a stronger monthly change than observed 12 months ago. We thus expect the annual CPI-ATE rate to have been lifted by 0.2 percentage points, to 1.8 percent y-o-y in November. The risk is slightly tilted to the upside, in our view (i.e. 1.9 percent). But such an outcome would still be too close to Norges Bank’s estimate (1.8) to affect the trajectory of the policy rate path.


Marius Gonsholt Hov

Senior Economist


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