Norway CPI 3.5% and Core CPI-ATE 3.1%: Why a September Rate Cut Is Now at Risk

Norway’s inflation snapshot for August sharpened a dilemma that had seemed settled: whether to ease again as soon as September. Headline CPI accelerated to 3.5% year-on-year, while the central bank’s preferred gauge, CPI-ATE, stayed pinned at 3.1%. Those numbers are not disastrous—far below last year’s peaks—but they are uncomfortably high relative to a 2% target. Strip out a one-off downward pull from new day-care subsidies and the underlying rate looks firmer still, which is why traders quickly trimmed odds of an imminent cut and the crown strengthened.

For policymakers, the signal is about persistence. Services inflation—where wages, rents, and regulated charges dominate—has been slower to cool than goods. That stickiness makes a rapid easing cycle risky: once expectations drift higher, dragging them back tends to require more, not less, restraint. The bank has already demonstrated its willingness to support growth with June’s surprise cut. The question now is whether repeating that move before core inflation convincingly trends lower would trade a little more growth today for a bigger credibility challenge tomorrow.

Three lenses help frame the decision. First, composition over headline: energy and volatile goods can swing month to month, but wage-linked services tell you where inflation settles. Second, measurement quirks: subsidy effects push measured inflation down without necessarily easing the underlying pressure; policy needs to look through that fog. Third, external anchors: the ECB’s guidance this week, plus global rates and the euro’s path, will influence domestic financial conditions even without a rate change in Oslo.

The market read-through is already visible. Front-end yields ticked higher as investors reassessed the glide path, and NOK found support on reduced dovishness. For portfolios, that favors a tilt toward cash-generative exporters and quality cyclicals over the most rate-sensitive domestic names. It also argues for a more balanced duration stance in local fixed income until survey data—particularly the regional network’s pricing and hiring intentions—confirm that underlying pressures are ebbing.

None of this precludes easing later in 2025. If upcoming prints show CPI-ATE grinding lower without subsidy distortions and wage momentum moderating, Norges Bank can proceed with a measured cut that preserves credibility. But the August mix—headline 3.5%, core 3.1%, and services still sticky—makes a wait-and-see stance in September the cleaner option.