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Norway’s January Inflation Keeps with December’s Projection

Norway’s January Inflation Keeps with December’s Projection

Walker England, Kara Dailey,


Talking Points:

  • Annual Inflation remains in-line with December PMC projections
  • CPI increases at an annual rate of 2.1% while PPI falls at an annual rate of 7.9%
  • USDNOK trends higher along its ascending trendline

Through employing robust monetary policy Norges Bank seeks to achieve their inflation target of 2.5%. Remaining flexible in achieving this level of stability the bank lowered its key rate by 25 bps in the month of December. Their ensuing 4/2014 MPC Report stated the committee’s intent to keep rates at 1.25% through March 2015 as inflation is expected to remain near 2.3% throughout the first quarter.

Thus, at an annual rate of 2.1% Norway’s January inflation remains in-line with December projections. The single most important benefactor to the increase—a rise in the price of electricity (4.5%). The annual price level was also aided by a rise in the value of transport vehicles (8.0%) and accredited rentals for home owners (2.2%). The core index was prevented from a further rise by dampened fuel prices which fell by 6.5% for petrol and 5.8% for diesel. On a month-to-month basis there was no change in December’s CPI.

Conversely, at an index value of 235.2 PPI increased by 0.2% from November to December. Once again higher electricity prices (+8.2%) were dampened by a fall in the price of refined petroleum, chemicals and pharmaceuticals (-6.7%). More specifically, the electrical component was drive up by a 12% increase in the system price at power market Nord Pool, while the petroleum index was driven down by a 22% decline in the price of oil (m/m).

However, year-over-year PPI dropped 7.9%. The decline in the price of petroleum products (-14.8%) and extraction related services (-16%) outweighed the 22.5% development among basic metals.

Chart Created by Walker England Using MarketScope2.0

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