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Locals See July CPI Justifying 25bps Hike Next Week

NORWAY
  • DNB: The drop in core inflation was inline with their expectations, and supports 25bps August rate rise. On seasonality, they observe that there seems to have been a change in the system for food pricing that may affect the seasonal pattern for falling prices in August. As such, it is likely that August inflation will exceed Norges Bank’s forecast. This will support another rate hike in September.
  • Nordea: Core inflation in July was closer to Norges Bank expectations. Other important data is broadly in line with the central bank’s view while the NOK is 2.5% stronger than expected. As such, they expect Norges Bank to hike by 25bps next week.
  • SEB: CPI-ATE’s correction lower has reduced the gap to Norges Bank’s trajectory. Core inflation was 0.1 ppts above the Norges Bank’s estimates, but inline with their view that it will hover between 6.2-6.4% in the coming months. The release should ease the pressure for continued 50bps rate hikes, as such they expect the Bank to stick to its guidance with a 25bps hike next week.
  • Swedbank: Following last year’s 7.5% m/m growth in food prices, the chances of a negative base effect were rather large. We see several uplifting signals, which could also have an impact on policy ahead, with domestic goods inflation topping out, food PPI coming down rather hard, NOK base effects reducing pressure on imports and services inflation still flat. There is little need to frontload more hikes over the coming policy meetings and see 4.25% as Norges Bank’s peak rate
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