Norway: Interest Rates Still Expected to Rise Again After Being Left Unchanged in June; Mixed Activity Data, Jobless Total Down Again, but Core Inflation Remains Defiantly Low

Summary

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Following the Norges Bank decision to leave interest rates unchanged at its 29 June meeting, the consensus is just in favour of a 25-basis point rise at the mid-August meeting, but there are arguments for the increase being delayed until September. Core consumer price inflation remains defiantly low and even the headline rate slipped back slightly in June, while the rate of producer price inflation has slowed again. Although unemployment has continued to fall, the rate of decline has slowed and, despite a pick-up in retail sales growth in May, the rate of credit growth also slowed. On the other hand, production output is rising (despite manufacturing output slipped), and it is by no means certain that the Norges Bank will raise rates next month. We marginally favour a rise in September, not least as the global economy remains in flux.

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Norway: Interest Rates Still Expected to Rise Again After Being Left Unchanged in June; Mixed Activity Data, Jobless Total Down Again, but Core Inflation Remains Defiantly Low

Rates unchanged in June - August or September for next increase

It is very tempting to echo the chief economist of Handelsbanken when he said that "the same old story of Norway continues." He was talking about consumer inflation, as it happens, but he could have been commenting on any other piece of economic data this month: benign inflation, a slight fall in manufacturing output but an increase in turnover, lower unemployment and a rise in the workforce, higher than expected retail sales growth, unchanged but still high credit growth and an increased ...

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