– Core inflation at 1.5% and headline CPI at 1.9% in April
– Inflation higher than expected maindly due to rise in food prices
– CPI-ATE 0.4 ppt higher than NB’s forecast in Apr, after 0.2 ppt lower in March
Core inflation at 1.5% and headline CPI at 1.9% in April
Price inflation numbers came in considerably higher than we, consensus and Norges Bank had expected for April. The consumer price index rose by 0.6% from March to April, mainly due to higher food prices. The 12-month growth in CPI was 1.9% in April, while the CPI-ATE increased by 1.5%. On a 12-month basis inflation was pulled up by imputed rentals for homeowners, alcohol and tobacco, restaurant services and transportation in addition to food prices. Prices of electricity also pulled CPI inflation up compared with April last year.
Stronger than expected core inflation weakens the case for an interest rate cut from Norges Bank
Core inflation, both measured by the 12 month growth in CPI-ATE and CPIXE was 0.2 percentage points lower than Norges Bank had expected in March. In April, however, core inflation measured by the 12 month growth in CPI-ATE was 0.4 higher than Norges Bank’s estimate. This clearly weakens the case for an interest rate cut in June. When Norges Bank on Wednesday kept the key policy rate unchanged, the sum-up of factors affecting the key policy rate so far was clearly on the weak side. With the latest inflation numbers, however, the picture is not so clear. Next week’s GDP data for Q1 will probably be what decides the matter. We will revise our estimates for the key policy rate once we have the GDP data.
Handelsbanken