Norway's consumer prices rose at a slower pace than forecast in August, providing further backing for the central bank's signal of an interest rate reduction in September.
The core inflation rate, which excludes volatile food and energy items, eased to 4.5% last month – below analyst expectations of 4.7% and the lowest level since February 2021. Headline inflation also moderated, slowing to 3.9% and representing a six-month low.
The softer inflation print was driven by declines in electricity and fuel costs. This stronger-than-expected disinflationary trend should help reinforce Norges Bank's view that borrowing costs can be reduced to aid the economy.
While wage growth and currency fluctuations continue posing upside risks, cooling price pressures strengthen the case for policy easing. Most analysts concur that these inflation figures increase the likelihood of Norway's central bank delivering its first rate cut in over a decade this coming month.
The modest reaction in the krone reflects markets still see a near 50-50 chance of a September cut. The currency has weakened significantly in 2022, boosting import costs and domestic inflation. How it performs in response to major central bank decisions will be a key determinant of Norway's monetary policy path.