Norway inflation to decline in 2022, pay commission says

© Reuters. FILE PHOTO: People walk at the street at Gronland district in Oslo, Norway, June 3, 2017. REUTERS/Ints Kalnins

OSLO (Reuters) – Norwegian headline inflation is forecast to decline in 2022 to 2.6% from 3.5% last year, but the prediction is uncertain and will be updated when more data becomes available on March 10, a publicly appointed commission said on Friday.

With members from labour unions, employers’ federations and Statistics Norway, the commission’s conclusions will influence the outcome of Norway’s annual round of collective bargaining.

Workers’ pay can influence future inflation and is closely monitored by the Norwegian central bank when interest rates are set.

Norges Bank Governor Oeystein Olsen on Thursday called for restraint in wage-setting, arguing that any rapid increases in pay could in turn trigger more rate hikes than would otherwise be necessary.

The forecast of 2.6% inflation was more benign than most economists have assumed, Danske Bank economist Frank Jullum said.

“If workers accept this, then the wage settlement (this year) will be more moderate than feared, removing much of the risk that Norges Bank must hike rates more than four times this year,” Jullum tweeted.

Core inflation, which excludes changes in taxes and energy prices, is expected to remain unchanged at 1.7% this year, below the central bank’s long-term target of 2.0%, the wage commission predicted.

Overall, wages in manufacturing industries rose by 3% last year, with factory workers earning a rise of 2.75% while office staff in the same companies received an increase of 3.25%, the commission said.

Bargains struck last year, a key measure in the upcoming bargaining, will add 1.25% to manufacturing wages in 2022, the commission said.