November inflation would have to surprise to the downside for rates to remain unchanged – Commerzbank

On Friday, Norwegian inflation data surprised notably on the upside. The data provided strong support for the Krone. Economists at Commerzbank analyze NOK outlook.

Inflation remains stubborn

Friday’s data now illustrates that inflation is more stubborn than assumed and that the fall in September was a one-off. It does not come as a complete surprise either that the market considers a rate hike in December to be more likely following the publication.

Before the rate decision, inflation data for November will be due, which should facilitate a better evaluation of underlying inflation pressures. 

Following Friday’s surprise and in view of the hawkish Norges Bank the data would have to surprise significantly to the downside for rates to remain unchanged. However, the Norwegian example also shows that markets should not be too hasty in giving the all-clear for inflation.