Sweden July CPI, yet another too low reading

In its July report the Riksbank revised down markedly both its wage and inflation forecasts. For instance its forecasts for CPIF inflation excluding energy were lowered for the entire forecast horizon. Despite the downward revision, the Riksbank's forecasts remain higher than ours.

After the bank's July meeting, inflation for June turned out to be lower than expected. In June the CPIF inflation print was 0.6% y/y, which was 0.2% point below our forecast and 0.1% point below that of the Riksbank. 

"The sharpest downturn in the prices of telecom services in the past 15 years came as a surprise. Moreover, food prices were lower than expected. The trend in the prices of telecom services seems to be explained by the launch of a new price structure by a major operator, which suggests that prices will not edge back up again in July", says Nordea Bank. 

The drop in food prices in June was a surprise, too, but is more in line with the trend in producer and import prices. A minor increase is expected in food prices in July.