VIEW: Svenska HB Now Look For Dec Hike

Svenska HB note that the CPI “print for October showed an abrupt and pronounced surprise to the upside.”

• “This was in stark contrast to market expectations that the core inflation rate would take another step downwards.”
• “In addition, the upward correction was broad based.”
• “All of a sudden, the CPI-ATE was back in line with Norges Bank's estimate.”
• “We will still have to await the outcome for November, however, which is due just a few days before Norges Bank's policy meeting in December.”
• “Even so, today's outcome proves the volatile nature of the monthly figures, and through the volatility, inflationary pressures remain solid still. Furthermore, the NOK exchange rate (I-44) is about 4-5 percent weaker than assumed by Norges Bank, and nominal wage growth has continued to accelerate in a situation where productivity growth also remains meagre.”
• “In summary, the required conditions are not being met to assure Norges Bank that underlying inflation is on the decline. Hence, we believe that the stars are aligned for Norges Bank to stick with its strategy from September, which implies that the key policy rate will be hiked further to 4.50% in December.”