Food Prices Expected To Drive January CPI-ATE Lower Tomorrow

Tomorrow morning sees the release of Norwegian January CPI (0700GMT/0800CET), where analysts look to lower food prices as a driver for the deceleration in CPI-ATE. Current bbg consensus has CPI-ATE at 5.3% Y/Y, while the Norges Bank forecasted 5.4% Y/Y in the December MPR. We note that domestic analysts generally have lower CPI-ATE forecasts than international counterparts.

• The I-44 index is around 1% higher (indicating a NOK depreciation) since the turn of the year. A soft inflation reading may see EURNOK test clustered resistance at 11.4792 (100-day EMA) and 11.5004 (Feb 5 high).
• A reminder that at the Norges Bank's January meeting, guidance that the policy rate would be kept at 4.50% "for some time ahead" was retained. However, the prospect of lowering the policy rate earlier than implied by the December MPR rate path was entertained, should the economy see a "more pronounced slowdown" or if inflation "declines more rapidly" than current projections.
• For a selection of analyst views on tomorrow's release, see below:

• CPI 4.6% Y/Y (vs 4.8% prior), 0.0% M/M (vs 0.1% prior).
• CPI-ATE 5.3% Y/Y (vs 5.5% prior), -0.1% M/M (vs 0.2% prior).

Norges Bank (December MPR): CPI 4.8% Y/Y; CPI-ATE 5.4% Y/Y

DNB: CPI 4.3% Y/Y, -0.3% M/M; CPI ATE 5.2% Y/Y, -0.1% M/M

• "We expect food prices to have risen by 0.5% MOM"…"This year, several chain stores have claimed price freezes or cuts for food products".
• "We expect that the decline for NOK last year has contributed to a less sharp decline in prices on clothing this January".

Handelsbanken: CPI-ATE 5.2% Y/Y

• "We expect to see that imported price inflation starts to slow more markedly in the coming months. This is also highlighted as an important factor behind the announced price cuts on food products in January".
• "There are reasons to believe that the CPI-ATE will continue to fall gradually below Norges Bank's estimates; supporting earlier and deeper rate cuts than are currently indicated by Norges Bank's most recent rate path".
• "We maintain our view that the first rate cut will happen just after the summer, and forecast a total of three cuts during the second half of the year".

SEB: CPI 4.8% Y/Y, 0.2% M/M; CPI-ATE 5.2% Y/Y, -0.1% M/M

• "January inflation is always uncertain and unstable seasonal pattern during and after the pandemic means that uncertainty is even higher than normal".
• "Anecdotal evidence suggests that near-term risks to food prices are skewed to the downside".
• "The impact from the exchange rate is predicated to culminate in the beginning of this year".