Low Swedish inflation pressures the Riksbank

The drop in oil prices is now feeding through to Swedish inflation. Much suggest that the Riksbank will revise down its inflation forecast next week. Fuel prices will shave off 0.14% point of the CPI in August and by additional 0.18% point in September, if prices remain at today's level. 

Thus, headline CPIF will be markedly lower than the Riksbank's forecast despite relatively small differences in core-inflation. Moreover, the SEK is currently 1% stronger than the Riksbank's view, and there are signs that the inflation impulses from the previous weakening of the SEK are fading. 

"In addition, recent financial turbulence may affect both the Fed and the ECB. All in all, there is a clear risk that Riksbank will revise down their inflation forecast next week, strengthening our view that the Riksbank will take more action", says Nordea Bank.