• Somewhat higher core inflation• But still well below Norges Bank’s view
• But weaker NOK more than enough to offset lower inflation
Core inflation (CPI-ATE) came out at 1.9 % y/y in October compared to 1.7% last month. Consensus was 1.8%, Nordea 2.0% while Norges Bank was 2.3%
Today’s figure indicates that the high August figure, which to some degree influenced Norges Bank’s view in the last MPR, was driven up by temporary factors. Still core inflation is well above the low level before summer.
Inflation is still below Norges Bank’s forecast even though the gap decreased somewhat from 0.5 to 0.4% points. This means that inflation points to a lower rate path in the coming December MPR. But NOK is currently 4% weaker than forecasted, pulling up the rate forecast and judged by Norges Bank’s latest reactions more than outweigh the 0.4% points lower inflation. The key figures the coming months will be crucial. If they confirm the weak picture that housing prices and retail figures have painted recently we could still see an unchanged or even lower rate path. Add to this rates abroad has dropped.
As expected food prices pulled up core inflation this month and somewhat more than we expected. On the other hand the rebound in prices on clothes after the seasonal sale was smaller than we forecasted. Add to this that airfares dropped m-o-m.
Nordea