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Fast Comment NorwayCPI-ATE continues to run below central bank estimates

  1. CPI-ATE was 1.2 percent in March, down from 1.4 percent in February and well below expectations
  2. HCMe and Norges Bank forecast was 1.5 percent in March; consensus was 1.4 percent
  3. Deviation explained by prices for imported consumer goods
CPI-ATE at 1.2 percent in March, down from 1.4 percent in February and well below expectations
Core inflation, as measured by CPI-ATE, was again lower than expected. The y-o-y rate fell to 1.2 percent in March, down from 1.4 percent in February. Norges Bank's forecast and HCMe was 1.5 percent in March, while the consensus was 1.4 percent. Looking at the details, the deviation can be explained by import price inflation running well below expectations (as shown in the chart below). Price inflation for domestically-produced goods and services was closer to expectations, however. Digging a bit further into the details, food prices in particular contributed to the lower y-o-y reading for CPI-ATE in March. However, the bigger surprise, in our view, was that other goods with a heavy import content failed to lift the annual CPI-ATE rate, something we would have expected in light of the NOK weakening toward the end of last year. Finally, and as we expected, prices for airfares did not lift the annual CPI-ATE rate in March (in fact, the annual rate declined). To sum up, the big surprise was the low reading for import prices. It remains to be seen whether these prices will rise in the near term. If not, the deviation relative to Norges Bank's estimates, which is already significant, will increase further. In isolation, this suggests a lowering of the policy rate path, but at this stage, it is too early to draw conclusions.


Marius Gonsholt Hov

Senior Economist


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