Analysts at Commerzbank suggest that the Norwegian inflation data published on Tuesday, which showed that the headline CPI decelerated more than expected to the 3.3% YoY rate in September from 4.8% previous, should not be overestimated.

Key Quotes:

“The overall rate eased more notably than expected from 4.8% to 3.3% yoy, but the core rate remained stubbornly high at 5.7% - even though it too eased more significantly than expected by the market. It is worth pointing out that the inflation target is 2%.”

“As a result of the publication NOK lost ground yesterday as the market considers the likelihood of a further rate step in December, which Norges Bank had signalled in September, to have eased thanks to the rapid fall in inflation rates, in particular considering recent data like industrial production or August GDP, which disappointed.”

“It is questionable whether Norges Bank will give a clear indication of what it intends to do in December as early as November, as new inflation data will only be published after that. At its meeting in December, on the other hand, it then has the GDP data for Q3, the new Regional Network Survey, new sentiment indicators and above all the inflation data for October and November at its disposal.”

“For that reason, it remains a little too early in my view to assume that Norges Bank will call off the rate step in December following yesterday’s inflation data. I think we will have to be patient for a little longer until we know. Until then geopolitical events and of course future data publications will affect NOK – depending on the results. In other words: NOK is likely to remain volatile.”