RPT--🇳🇴Cable FX Macro Weekly Note: Norway January Consumer Prices

**As seen in Risk In The Week report 02/02/24, subscribe at cablefxm.co.uk/reports 

Norway headline inflation stayed unchanged at 4.8% Y/y in December, this was slightly lower than the consensus forecast of 4.9%. However, the underlying price measure slowed to 5.5% Y/y from the prior 5.8%, economists had expected the metric at 5.6%. Norway underlying CPI is now at the lowest level since September 2022. The slowdown in core inflation is supporting views for faster monetary policy easing from the Norges Bank, swaps market expects the rate-cutting cycle to start as soon as May.

The desk at UBS disagrees with market pricing and pencils in the first 25bps rate cut by September, their call is influenced by expectations of above 4% underlying CPI print until at least 3Q 2024. However, UBS is aware of the risks of an earlier rate cut if progress in disinflation is faster than the bank estimates. A recent Bloomberg poll showed economists revising their Norway headline inflation forecast higher to 3.5% in 2024 from their prior view of 3.2%, and the median expectation sees the Norges Bank lowering policy by the third quarter. UBS expects 50bps of easing in 2024 and 150 in 2025, this will leave the policy rate at 2.5%.