Norway: July inflation on the downside could create more uncertainty – Nordea

According to Erik Johannes Bruce, analyst at Nordea Markets, a low July inflation figure of Norway could create more uncertainty about the September hike, but believes that Norges Bank will stick to its forecast.

Key Quotes

“The June rate path was consistent with an 80% probability for a September hike. The big question the coming weeks in the Norwegian market is whether Norges Bank will signal a September hike at its “in-between” meeting on August the 15th.”

“Domestic figures during the summer have been roughly in line with Norges Bank’s view with one exception. Registered unemployment was somewhat higher than expected in July. We will not do too much out of one month and assume Norges Bank will draw the same conclusion.”

“The one coming domestic figure which could influence the August message is July inflation out 9 August. We forecast core inflation at 2.1 % y/y, down from 2.3% last month. Norges Bank’s forecast is 2.4% while consensus is 2.2%.”

“Our forecast implies that inflation will be 0.3% point below Norges Bank’s forecast after being 0.1% point below in June. The gap is large enough to have an impact on Norges Bank’s view on rates.”