March 10, 2017 / 8:18 AM / 6 months ago

Norway inflation below forecast, pressures central bank

OSLO, March 10 (Reuters) - Norwegian consumer prices fell to four-year lows in February, Statistics Norway said, putting pressure on the central bank to maintain an easing bias on interest rates and plunging the crown currency to a four-month low against the euro.

Core inflation, which excludes effects of tax changes and energy prices, tumbled to 1.6 percent year-on-year from 2.1 percent in January, while analysts in a Reuters poll had on average expected core inflation of 2.0 percent.

The forecast miss was even greater for the central bank, which in December predicted that February inflation would stand at 2.6 percent, just above its medium-term target of 2.5 percent.

While recent economic data have pointed to stronger-than-expected growth, the lower inflation introduces a difficult trade-off for the central bank when its board announces its next interest rate decision on March 16.

As a result, Norges Bank will probably maintain its easing bias and refrain from lifting its forward rate guidance, Nordea Markets economist Erik Bruce said.

“We had anticipated an upwards revision to the rate path next week, but we’re doubting that now. I believe they’ll keep the path where it is,” he told Reuters.

Norway’s crown currency weakened to around 9.1235 shortly after the 0700 GMT data release from 9.0881 earlier, the weakest level seen since November of last year. (Reporting by Camilla Knudsen and Ole Petter Skonnord, editing by Terje Solsvik)

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