Norway's core inflation rate continued to rise in June hitting a fresh record, Statistics Norway (SSB) data has shown, boosting the probability that interest rates will continue to rise and push up the value of the country's currency.
Core inflation, which strips out changing energy prices and taxes, rose 7.0% year on year, up from 6.7% in May and exceeding the 6.6% average forecast from analysts polled by Reuters.
Higher food prices, especially for fruit and vegetables, was the most important factor behind the increase, which is unusual for June and could be related to a weakened crown currency, SSB said.
The central bank, which aims for core inflation of 2.0% in the medium term, had predicted that inflation would only rise to 6.6% in June.
Interest Rate Hike
In June, it raised its key policy rate by 50 basis points (bps) to a 15-year high of 3.75% in a bid to curb inflation, and said it aimed for another hike in August, predicting the rate would rise to 4.25% during the autumn.
"A higher policy rate than previously signalled is needed to bring inflation down to target," Norges Bank said in June, while warning that the policy rate might have to go higher than project "if the crown turns out to be weaker than assumed or pressures in the economy persist."
At the same time, the effects of past rate hikes are not yet fully evident in the economy, Norges Bank added.
"If inflation declines more rapidly or there is a more pronounced slowdown in the Norwegian economy, the policy rate may be lower than currently envisaged," it said.