Norway: Inflation drops to nearly four-year low in November
Latest reading: Inflation came in at 2.4% in November, which was down from October’s 2.6%. November’s reading represented the lowest inflation rate since December 2020, moved closer to Norges Bank’s 2.0% target and undershot the Bank’s projections; that said, the print surpassed market expectations. Looking at the details of the release, the moderation was primarily driven by softer growth in prices for housing and utilities.
Accordingly, the trend pointed down, with annual average inflation falling to 3.4% in November (October: 3.6%). Meanwhile, core inflation rose to 3.0% in November from October’s 2.7%. October’s result broke a year-long streak of declining core inflation, matching Norges Bank’s projections but surprising markets to the upside.
Finally, consumer prices rose 0.30% in November over the previous month, which was below the 0.60% rise recorded in October. November’s result marked the softest rise in prices since August.
Outlook: Inflation will average close to current levels overall in Q4 2024, and slow only marginally in 2025 as it moves closer to Norges Bank’s target.
Overall in 2025, inflation will slow from 2024, but it is seen above target until 2027. Stronger-than-anticipated private consumption and wage growth pose upside risks, while the strength of the krone is a two-sided risk.
November’s increase in core inflation, coupled with mainland GDP growth beating Norges Bank’s projections in Q3, could push the Central Bank to delay the start of its loosening cycle until March 2025.
Panelist insight: This view is shared by analysts at the EIU:
“It [Norges Bank] will begin a cutting cycle in the first quarter of 2025, when inflation will probably be closer to its 2% long-term target […]. Nevertheless, this does mean that Norges Bank will be one of the last major central banks to begin a cutting cycle. Strong core inflation, the weak krone and a hot labour market have made Norges Bank cautious in loosening monetary policy too quickly.”