Norwegian Election And Inflation Data In Focus‏

Both Swedish and Norwegian inflation data are expected to show that inflation has bottomed out. Especially, Norwegian core inflation could be interesting ahead of the Norges Bank meeting on September 19th.

The catch-up in Swedish numbers continued last week, and the Riksbank kept its rate path almost unchanged despite a lower than expected unemployment rate. But, still the Riksbank had a less expansionary tilt. We expect the process towards a less expansionary policy to continue to run its course during the coming months. Actually, we would not be surprised to eventually see the Riksbank moving the first hike to H1 14.

The Norwegian general election started yesterday and continues today. The election will close at 20:00 CET. According to the polls, the election is likely to result in a change of government, with the conservative/moderate Erna Solberg set to replace current Prime Minister Jens Stoltenberg (social democrat). As a result, we expect a moderate increase in public spending combined with a reduction in taxes.

We take a closer look at the possible revisions to the Norges Bank rate path at the monetary policy meeting on 19 September. We argue that given the latest development in inflation and the NOK that the probability of a rate cut should be removed. However, Norges Bank has earlier surprised with a "dovish twist" and we do not expect to see the NOK performing before after the Norges Bank meeting on 19 September.

In Denmark we expect the very high current account surplus to have remained more or less unchanged at DKK13.0 billion in July. Over the past twelve months, it leaves the accumulated surplus at DKK106 billion. The very high surplus which amounts to around 4.5-5% of GDP on an annual basis effectively raises the bar for how much currency outflow is allowed without putting pressure on DKK.

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