Inflation Holds No Surprises, but the Problem Remains. Norges Bank May React Soon

Core inflation reached 3.0 percent. The results are consistent with previous Norges Bank forecasts. Economists emphasize the lack of surprises. They also note that inflation remains at an elevated level.

SB1 Markets chief economist Harald Magnus Andreassen told E24 that the data matches earlier expectations. Inflation has returned to the level seen two months ago, and a similar rate was also recorded in October. There are no factors requiring changes in fiscal policy. Andreassen highlights that wage and pension growth outpaced price increases.

At the same time, inflation remains too high. In Andreassen’s view, Norges Bank will have to raise interest rates. The overall level of inflation is decisive. Kjersti Haugland from DNB Carnegie shares a similar opinion, pointing to a possible rate hike in June. Meanwhile, Mariusz Gonsholt Hov from Handelsbanken believes the data does not change the risk of a hike, but inflation remains worryingly high.

According to SSB, the rise in inflation in March was mainly driven by energy and fuel. Energy prices fell month-on-month, but the drop was smaller than in the same period last year. At the same time, fuel prices rose sharply, influenced by the situation surrounding the conflict with Iran.

Economist Kyrre M. Knudsen points to food prices, which increased by 1.6 percent. A possible factor is the Easter holiday effect. Meanwhile, the strong NOK has not yet translated into lower prices for imported goods, such as clothing and electronics. This effect is not yet visible in the data.

March data fits into the stable inflation picture observed in recent months. At the same time, it maintains pressure on Norges Bank’s decisions in the coming months. Further changes in energy and fuel prices, which had the greatest impact on the inflation rate in the latest reading, may be significant.