MNI POLICY: Norges Bank Q4 Survey: Infla Expectations Edge Up

By David Robinson

     LONDON (MNI) - A Norges Bank's survey showed economists and business

leaders' year ahead inflation expectations nudged higher in the fourth quarter,

while the krone was only expected to rise a little in the year ahead.

     The Expectations Survey showed wage growth was anticipated at 2.8% or 2.9%

this year and that profitability would hold up. The survey is consistent with

the Norges Bank Executive Board guidance that the key policy rate will most

likely be hiked further in Q1 2019.

     The following are key points from the Q4 Expectations Survey, which covers

economists, business leaders and social partners (unions):

     -- Economists expected whole economy inflation 12 months ahead to be 2.4%,

up 0.1 percentage point from the Q3 survey result, identical to the social

partners' expectations. Business leaders expected inflation 12 months ahead to

be 2.5%, up 0.1 percentage point from Q3. Households inflation expectations were

markedly lower, at 1.9% 12 months ahead.

     -- Wage growth is expected to edge up in 2019, falling just short of 3.0%.

Business leaders expected wage growth next year to be 2.9%, up from 2.8% this

year. Economists expected annual wage growth of 2.9% in 2018 and the social

partners saw growth of 2.8%.

     -A narrow majority of economists surveyed expected the krone to rise, but

only modestly and expectations were relatively bearish compared to the Q3

survey. In all 55.3% of the economists expected the effective krone exchange

rate to be stronger in 12 months time, down 12.1 points from the Q3 survey. The

average expected magnitude of the krone appreciation in 12 months time was just

2.5%, which was a percentage point lower than in the previous survey.

     -The corporate profitability picture was little changed, with 31.5% of

business leaders anticipating profitability improving over the next 12 months, a

marginal 0.3 percentage point fall from the previous quarter. 39.2% of business

leaders expect profitability to remain unchanged over the next 12 months.

     -The quarterly expectations survey provides a key set of data for the

central bank's executive board ahead of its January meeting, with the interest

rate decision to be unveiled on January 24. There has been little or nothing in

recent data flow to undermine the central bank's guidance for a Q1 hike.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com