OSLO, June 9 (Reuters) – Norway’s core inflation rate jumped to a record high in May, Statistics Norway data showed on Friday, increasing the probability that interest rates will continue to rise while boosting the value of the Norwegian crown against the euro.
The biggest drivers of the May increase were food prices, air travel and the cost of renting a home, the statistics agency said, adding that inflation appeared to have “settled at a high level”.
Core inflation, which strips out changing energy prices and taxes, rose 6.7% year on year, up from 6.3% in April and exceeding the 6.2% average forecast among analysts polled by Reuters.
The cost of food has risen by 12.7% in the past twelve months, the data showed.
As a result, the Norwegian central bank could raise interest rates to more than 4% from the current 3.25%, including a potential hike of 50 basis points this month, said Nordea economist Dane Cekov .
“This is very bad news for Norges Bank,” he added.
The central bank, which is targeting core inflation of 2% in the medium term, had predicted that inflation would ease to 6% in May.
Norway’s crown currency strengthened to 11.66 against the euro by 0810 GMT, from 11.75 ahead of the 0600 GMT data release.
Statistics Norway separately released forecasts predicting that core inflation will ease to 2.8% in 2024 and 2.1% in 2025.
It expects gross domestic product, excluding the volatile oil and gas sector, to grow by 1.3% this year and by between 1.5% and 1.6% from 2024 to 2026.