(Bloomberg) -- Norway’s underlying inflation slowed more than analysts expected last month, likely putting to rest the case for one more interest-rate hike by the central bank this week.

The core inflation rate, watched closely by economists and Norges Bank, declined to 5.8% in November, according to a statement from the statistics office on Monday. That compares with a 5.9% forecast by analysts and Norges Bank’s estimate of a 6.1% gain. 

The data reinforces the picture of a broadening cooldown in Norway’s economy that faces a contraction at the start of 2024. It also underpins the view that Norges Bank has reached the peak of borrowing costs this cycle and is set to keep its key rate on hold on Thursday at 4.25%.

“Core inflation seems to have peaked in June and is gradually coming down,” Danske Bank A/S’s economist Frank Jullum said. “It still remains well above the 2% target which calls for a continued restrictive monetary policy, but as medium-term inflation drivers have turned, we have most likely seen the peak in rates as well.”

The fossil-fuel rich economy is likely stagnating in the current quarter before contracting at the start of the year, a key sentiment survey by the central bank confirmed last week. In a sign of ailing consumer demand, Norwegians spent less on Black Week shopping than in any year since 2019, according to the country’s largest lender, DNB Bank ASA.

The weakness of the krone, the worst performer in the G-10 sphere of major currencies this year, is the only factor that could still prompt a rate hike on Thursday, according to analysts at Nordea Bank Abp. The Norwegian currency eased on the news, down 0.2% at 11.7640 versus the euro at 9:37 a.m. in Oslo.

Price growth was mainly driven by discount campaigns for electronics and furniture, as well as cheaper plane tickets, the statistics office said.

Headline inflation accelerated to 4.8%, compared with a projection of 4.9% by analysts and Norges Bank’s view of 5.4%, driven by higher power consumption amid cold weather.

“Norges Bank will now feel assured that underlying price growth is trending gradually lower — which is the condition they have set for keeping the policy rate on hold this week,” Svenska Handelsbanken AB’s chief economist Marius Gonsholt Hov said in a note to clients. Still, a full return to the inflation target “may still take quite some time,” he said.   

Neighboring Denmark recorded a similar trend in November, seeing core inflation slow to 3% from 3.3% in the previous month, led by rents of holiday homes and appliance purchases. The trend is “very positive” and gives hope that inflation will not accelerate significantly again next year, Tore Stramer, chief economist at the Danish Chamber of Commerce, said in a note.

--With assistance from Joel Rinneby and Sanne Wass.

(Updates with analysts’ forecasts from fourth paragraph, Denmark in final paragraph)

©2023 Bloomberg L.P.