Norway’s Inflation Jumps More Than Expected to 13-Year High

Norway's inflation tied to energy

ENB Publishers Note: There is a direct and undisputed relationship between inflation and the Energy Crisis. The countries that produce energy will have a lower inflation rate. Those that rely on others for their energy are going to have the highest. Russia, Saudi Arabia will have the lowest inflation rates in the world over the next few years. The U.S. and most of the western countries will be in the high inflation range due to the poor energy policies put into effect. Norway is going to have high prices as they struggle with their energy policies vacillating between renewables and fossil. 

Norway’s inflation accelerated more than expected last month to the fastest pace in 13 years on soaring electricity prices, adding urgency to the government’s plans for subsidies to cushion the effect for consumers.

Headline inflation rose to 5.1%, the highest level since October 2008, with electricity prices contributing 3.3 percentage points, Statistics Norway said on Friday. The reading was higher than all estimates in a Bloomberg survey of economists, which had a 4.6% median. Norges Bank, which is due to decide on rates next week, expected inflation at 3.9% in its September projection.

Norway’s CPI hit a 13-year high even as core prices trail policy target

The data adds to the picture of Norway’s robust recovery outpacing most its rich peers and of growing labor shortages, while an energy price crisis in Europe is boosting power prices and denting the purchasing power of Norwegians.

Still, with relief measures expected from the government, the central bank’s decision next week will mainly focus on the uncertainties linked to the omicron virus strain and the risk of more restrictions, according to Svenska Handelsbanken’s economist Marius Gonsholt Hov.

Following the lead of other European nations, the government of Premier Jonas Gahr Store is planning to increase housing benefits by 1,500 kroner ($167) per household from December until March for a total cost of 500 million kroner, public broadcaster NRK reported earlier this week. Each person in those households will be paid an additional 150 kroner, it said, citing Local Government and Regional Development Minister Bjorn Arild Gram.

The growing wage pressures and higher electricity prices spilling over to other costs suggest underlying inflation, the measure followed by the central bank, will be accelerating after growing 1.3% in November, Swedbank’s economists said in a note to investors. The central bank could lift its inflation projections next week and possibly see core prices returning to 2%-target before end-2024, they added.