Norway core inflation rises as Norges Bank signals possible further hikes

Norway’s inflation fight is not over. Core prices, which strip out energy and taxes, rose 3.2% in April from a year earlier, up from 3.0% in March and still far above Norges Bank’s 2% target, keeping the door open to more borrowing-cost pain for households later this year.

Statistics Norway’s latest figures showed the broader consumer price index up 3.4% year on year in April, with the monthly CPI rising 0.4%. The underlying CPI-ATE measure climbed 0.7% from March, a reminder that price pressure is still working its way through the economy even after earlier tightening. Food and non-alcoholic beverages were up 6.6% from a year earlier, restaurants and accommodation services rose 5.8%, housing, water, electricity, gas and other fuels gained 3.6%, and transport increased 2.4%.

The numbers landed just days after Norges Bank raised its policy rate by 25 basis points to 4.25% from 4.0% on May 6, a move that caught some analysts off guard. The central bank said inflation had been above target for several years and warned that unexpectedly strong inflation and firmer wage-growth prospects had lifted its outlook. It also pointed to higher oil and gas prices tied to the war in the Middle East, saying the temporary ceasefire between the United States and Iran had not restored normal shipping through the Strait of Hormuz and that oil spot prices remained elevated.

Governor Ida Wolden Bache said the bank would keep fighting inflation, while signaling that a sharp additional increase was not expected. She said the information received in recent weeks supported the March analysis and reiterated that the operational target was inflation of close to 2% over time. She also said inflation had been around 3% over the past year and a half, with domestically produced goods rising fastest.

For markets, the message was one of persistence rather than surprise. The crown was little changed after the release, suggesting traders had already anticipated the April reading. The next Norges Bank policy announcement is set for June 18, and analysts do not broadly expect another move then, though some still see one later in the year. Statistics Norway’s next CPI update is due on June 10, giving policymakers and borrowers another quick read on whether Norway’s price pressures are finally starting to ease or remain stubbornly embedded.