Norwegian core inflation came in below projections in January, owing to solid price cuts in the winter sale. On a year-on-year basis, core inflation came in at 2.1 percent, the same as December’s print. Consensus expectations were for the core rate to have risen to 2.3 percent, while Norges Bank had expected 2.2 percent.
The price cuts on shoes and clothes and furniture were almost as strong as last year. Together these items pulled down core rate by about 0.1 percent.
Stronger price cuts in the winter sale are usually followed by stronger rise in prices after the sales. For furniture, this effect should be seen already in the February figure while one might have to wait for the March figure to see the entire impact on clothes and shoes, noted Nordea Bank in a research report.
Norges Bank in unlikely to do much of this figure. It is quite close to projection and inflation in the last month was on the upside. Moreover, the core inflation is expected to decelerate to 2 percent in February.
“Given that today’s’ figure were held back by most likely temporary factors we find it likely that inflation will end up at or higher than this. Anyway with inflation close to target it is not central to either the March rate decision or the rate path”, added Nordea Bank.