(Hegnar.no): “Norges inflation rate continues to exceed all other developed countries,” writes HSBC economist James Pomeroy in a note on the basis of August, figures that were released yesterday.
Inflation was 2 per cent last year, while core inflation (CPI-ATE) was 2.9 per cent. Inflation adjusted for energy and tax changes have only been higher once the last six years. It was in June this year.
In Sweden fell to comparison CPI 0.2 per cent last year. Underlying inflation is there of 0.8 percent, Finance writes newspaper today.
If financial stability determines
“Norges Bank will have to weigh the weaker growth prospects against the fact that core inflation is above target and that the crown is down 12 percent over the past year on the trade-weighted basis (22 per cent against the USD), “writes HSBC.
” The next interest rate decision is on 24 September and we still think of no change in key rates since Norges Bank still is concerned about financial stability. “
Today, Norges Bank’s key rate 1 percent.
No other developed country has inflation rate of 2 percent, according to HSBC . Although the nominal policy rate to Norges Bank is among the lowest, is therefore real interest to Norges Bank clearly negative and the lowest among rich countries.
This is essential
chief economist Kari Due-Andresen at Handelsbanken agrees that inflation figures, the weaker krone and higher house prices than expected in isolation suggest that the key policy rate unchanged in September.“The real economy, however, seems to depreciate so much faster than what Norges Bank expected in June, that it ought to defend an interest rate cut, “she wrote in an update on inflation figures, but added that the current signals from Norges Bank’s regional network for the business sector is essential.
If network report about it Similar growth image as the last, rather we against that Norges Bank pushes interest rate cut later in the fall, wrote Due-Andresen in today’s morning report.
The signals from Norges bank today is that output growth has been weak over the last 3 months, but that growth was little changed from May and in line with expectations in the previous round.
Little change
Production decline has accelerated in the petroleum supplier industries and corporate services. In construction, output growth has slowed. At the same time, growth has accelerated in the domestic-oriented industries and traditional industries. Overall then contacts for little changes in activity levels over the next six months, it says.
When it comes to employment says the network that it has been little changed over the past three months, and that the development has been in line with the contacts envisioned in May.
contacts the petroleum industry reported a significantly lower level of employment. In construction and manufacturing was sluggish employment growth, while other industries have had virtually unchanged employment levels. The next 3 months waiting contacts that employment total will remain stable, says the Norges Bank’s network.
Capacity utilization in enterprises has fallen to its lowest level since the start of this reporting in 2005.
The proportion of firms reporting that labor limited production growth slowed further. Contacts reported that the level of employment has remained stable, and the expected unchanged level in the future. Total estimated connectors annual wage growth in 2015 at about 2.75 percent, unchanged from the previous round, writes Norges Bank.
Weaker indicator, but not weak enough?
Network indicator for production growth expectations next six months is 0.06 against 0.13 at the previous update. The figure for the last three months fell from 0.16 from 0.11. The index ranges from -5 to +5, where -5 indicates a large fall and +5 indicates strong growth.– We do not believe the signal was weak enough to warrant a rate cut at the upcoming monetary policy meeting on 24 September. Inflation is higher and the Norwegian krona weaker, and the rise in house prices is higher than expected in the Monetary Policy Report. Because of this, we believe that the likelihood has increased that interest rate cut pushed to Q4, type macro economist Marius Gonsholt Hov at Handelsbanken Capital Markets.
However, he adds that it’s small margins here and that Norges Bank could still surprise with a rate cut in September, since the downside risk for the Norwegian economy has increased with the low oil price.
Not absolutely certain rate cuts, but …
Chief Economist Shakeb Syed in Sparebank 1 Markets are not as insecure nor still that Norway Bank cuts key interest rate in September.
– Network report suggests that mainland growth in Q3 will come in lower than the central bank’s estimate, and growth will slow also into Q4. This speaks for a clean cut on the 24th this month, he said.
He added that the strong inflation figures yesterday pointing in the opposite direction, but says that one should keep in mind that the figures partly was driven by a technical base effect that Norges Bank probably look through.
– All in all we think therefore it is quite likely that Norges Bank cut interest rates in approximately two weeks, but we are by no means cocksure, he said.
chief economist Harald Magnus Andreassen in Swedbank believes, however, feedback from the network is a great argument to cut interest rates.
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