Norway’s inflation accelerated more than expected last month to a new 13-year high, raising pressure on the central bank to speed up its interest rate-hike plan to more than one increase per quarter.
Consumer prices rose 5.4% from a year earlier, the fastest pace since October 2008, according to data from Statistics Norway on Tuesday. Economists surveyed by Bloomberg expected a 4.7% increase, while Norges Bank’s own forecast was 4.5%.
The data, which also included a faster-than-expected rise in core prices, fuels speculation that the central bank may opt to raise borrowing costs at a quicker pace than the one 25 basis-point increase per quarter that it has communicated for the remainder of this year and 2023.
“We can’t conclude otherwise than that this puts more pressure on Norges Bank, and points to an upward adjustment of the interest rate path in June,” Svenska Handelsbanken’s analysts Marius Gonsholt Hov and Nils Kristian Knudsen said in a note. They pointed out that core price growth was mostly boosted by Norwegian-produced goods and services.
Norges Bank was the first among nations with the world’s 10 most-traded currencies to begin raising borrowing costs last year. Policy makers last week confirmed their plan to deliver a fourth increase in borrowing costs next month and repeated a warning of faster hikes if needed to quell inflation.
Read More: Norway Rate Hike Locked and Loaded for June to Quell Inflation
Underlying inflation, the key measure followed by Norges Bank, accelerated to 2.6% in the year, the highest level in 13 months. This compares with economists’ estimate of 2.4%, while the Norges Bank saw an increase of 2.3%.
“Clearly, the underlying price pressure is rising, both imported and domestically and is not transitory in any way,” Danske Bank’s economist Frank Jullum said. “That said, the upside surprise in the April figures seems to a large extent to be driven by Easter effects, which should prove to be more temporary after all.”
Neighboring Denmark also reported a jump in headline inflation, to 6.7% in the year in April. The rise, mainly driven by electricity and heating, was the highest since 1984.
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