Both headline and underlying inflation surprisingly ticked lower in August ahead of next week’s Norges Bank meeting.
Norway’s inflation continues to soften. According to yesterday’s inflation release, headline inflation fell from 1.5% YoY in July to 1.3% in August. This marks the tenth consecutive decline in headline inflation, and just a year ago, it still stood at 4.0% YoY. The latest decline was mostly driven by lower food price inflation. Underlying inflation also softened to just 0.9% YoY in August, now at the lowest level since March 2013. Both inflation measures are on track to come in below Norges Bank’s central projections from the June meeting. This also dampens expectations that Norges Bank may shift its projection of a first rate hike meaningfully forward from the current year-end 2019. The NOK accordingly weakened against the USD and lost 1.5% YoY by the end of yesterday.