Norway: Headline and core inflation accelerate in January
Latest reading: Inflation came in at 2.3% in January, up from December’s 2.2%. Looking at the details of the release, the acceleration was broad-based, with greater price pressures recorded for housing and utilities, transportation, plus food and non-alcoholic beverages.
Still, the trend pointed down, with annual average inflation falling to 3.0% in January (December: 3.1%). Meanwhile, core inflation unexpectedly rose to 2.8% in January from December’s 2.7%, overshooting market and Norges Bank projections.
Finally, consumer prices increased 0.22% in January over the previous month, contrasting December’s 0.07% drop.
Outlook: Our Consensus is for inflation to slow from 2024 this year, pressured by tight monetary policy and a higher base of comparison. Still, inflation will remain above Norges Bank’s 2.0% target, fanned by faster private consumption growth. Upside risks include faster-than-projected wage growth and higher imported inflation stemming from protectionist policies. Meanwhile, the strength of the krone is a two-sided risk.
January inflation data for headline and—particularly—core inflation cast doubt over whether the Norges Bank will kick off its loosening cycle on 26 March, as it had anticipated at its last meeting on 22 January; Norway’s mainland GDP unexpectedly contracted quarter on quarter in Q4, suggesting that Norges Bank had all the elements it needed to reduce rates.