Norway’s core inflation jumped in July to its highest in more than two decades, exceeding forecasts as the cost of food soared, raising analyst expectations of faster increases to interest rates.
The core annual inflation rate, which strips out changing energy prices and taxes, rose to 4.5% in July, up from 3.6% in June, Statistics Norway (SSB) data showed.
A Reuters poll of analysts had predicted price growth of 3.8%.
“This is the strongest underlying inflation we’ve seen since we began measuring the indicator in 2001,” SSB economist Espen Kristiansen said in a statement.
The average cost of food and non-alcoholic beverages rose by 7.6% in June alone and was up 10.4% year on year. Headline inflation, which includes energy prices, rose to 6.8% year on year, against analyst expectations of 6.3%.
The Norwegian crown strengthened on the news to trade at 9.91 versus the euro at 0822 GMT, compared with 9.93 before the data release.
Norway’s central bank, which is due to announce its latest interest rate decision next week, targets core inflation of 2% and had forecast a rate of 3.2% in July.
Norges Bank’s monetary policy committee raised its key policy rate by 50 basis points (bps) in June to 1.25% and said a 25 bps increase was likely to follow in August, though some economists now expect it to announce a 50 bps increase.
“The inflation is broad-based and seems to be stronger than Norges Bank anticipated,” DNB Markets wrote, adding that it now expects increases of 50 bps in both August and September.