Norway’s core inflation hits 6%, Norges Bank poised for December rate hike

Norway’s core inflation rate rose to 6% in October, according to data released by the country’s statistics office. This unexpected surge aligns with the central bank’s projections and exceeds a median estimate of 5.6% from a Bloomberg economists’ survey. The news has sparked speculation about a possible additional interest rate hike by Norges Bank next month.

The ongoing interest-rate hiking cycle in Norway is currently the longest among G-10 nations. The recent increase in inflation could potentially trigger a further hike, despite Governor Ida Wolden Bache’s suggestions that a 4.5% rate increase could be avoided if there’s assurance of declining underlying inflation.

However, concerns persist due to the krone’s recent weakening, which has made it the second-worst G-10 performer after the yen. Following the inflation announcement, the krone strengthened by 0.5% against the euro, equating one euro to 11.9241 kroner.

Headline inflation, which takes into account tax changes and energy prices, grew to 4% from 3.3%. Record salary growth is stoking fears about a wage-price spiral and imported inflation.

Despite a fall in the Consumer Price Index (CPI) in September, Norges Bank’s monetary policy is expected to continue its trajectory and raise rates in December due to a weaker Norwegian Krone (NOK). The October core inflation rise surpassed consensus and predictions based on food prices, reinforcing the rationale for an interest rate increase.

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