Norway’s Inflation Data Dampens Expectations for Rate Cut

Norway’s core inflation rate has shown a slight easing, contrary to analysts’ expectations, reducing the likelihood of a rate cut by the central bank in the coming months. The underlying inflation rate, excluding volatile items like energy, dropped to 4.1% in May, slightly above the predicted 3.9% and just below the central bank’s projection of 4.2%.

This trend indicates that inflation pressures in Norway, particularly in comparison to its European counterparts, remain high. Despite a recent strengthening of the krone, the inflation data does not support immediate central bank intervention, unlike Sweden and the euro area, which have already begun reducing interest rates.

The report suggests a continuation of disinflationary trends in Norway, according to Kristoffer Kjaer Lomholt, an expert at Danske Bank A/S. This, in turn, lowers the probability of a rate cut in September.

While the krone saw a slight increase in value following the release of the data, headline inflation fell to 3%, the lowest since July 2021. This decline was primarily driven by lower electricity prices due to increased water reservoir levels and ample gas reserves in Europe.

In contrast, Denmark experienced a rise in consumer prices, reaching 2.2% in May, the highest rate since August. This inflation surge was attributed to increases in electricity and rent prices.

The overall inflation data indicates a complex economic landscape in the Nordic region, with implications for monetary policy and currency valuation.

(Source: Original article from a local newspaper)