A Norwegian government committee tasked with providing input for wage talks between labor unions and employers forecast inflation will slow more than projected by the central bank, suggesting pay pressures could be kept at bay.
The Norwegian Technical Calculation Committee for Wage Settlements sees inflation at 4.1 per cent in 2024, according to a statement on Friday. That compares with Norges Bank's estimate of 4.4 per cent in its monetary policy report from December, while the Finance Ministry has projected a 3.8 per cent gain.
The Nordic country's labor market has so far largely brushed off the effects of higher prices and credit costs, contributing to wage growth of 5.3 per cent last year, the fastest in 15 years. With inflation-adjusted salaries declining for a second year, analysts expect heightened pressure from the unions for compensation.
"In recent months, the krone exchange rate has strengthened, and forward prices for power have fallen," the committee said, adding it will present a new inflation estimate on March 12. "The uncertainty is particularly linked to developments in the krone exchange rate, energy prices and international price growth."
The wage overhang to 2024 is currently estimated at 1.6 per cent for industrial workers, 1.8 per cent for industrial salaried employees and 1.7 per cent for industry as a whole in the Confederation of Norwegian Enterprise, or NHO, area, the committee said.
The preliminary assessment "should calm fears of a high wage round," Danske Bank's Kristoffer Kjaer Lomholt wrote. "At this stage there is no smoking gun in the report," he said.
Central bank Governor Ida Wolden Bache pointed out in her annual speech in Oslo on Thursday that Norway's wage bargaining system reduces the risk of wage-price spirals as the negotiating parties give weight to employment. Still, wage growth "could contribute to keeping inflation elevated in Norway even amid falling inflation internationally," she said, citing "substantially higher" costs for companies.
With inflation remaining among the fastest in western Europe, Norges Bank has signaled it will hold its benchmark rate at a 16-year high of 4.5 per cent "for some time ahead." It will also have to wait out easing by its larger global peers to avoid repeating the developments of the past two years, when slower rate hikes helped weaken the krone, boosting imported price pressure.
