Sweden’s October inflation below Riksbank’s view, rate cut likely in December

Sweden’s inflation for the month of October came in consistent with the consensus expectations; however, it was below Riksbank’s view. Inflation gauged by consumer price index accelerated to 1.2 percent year-on-year in October, a rise from September’s 0.9 percent and in line with consensus projection of 1.2 percent, noted Statistics Sweden.  Riksbank had projected 1.3 percent. The upward contribution to the consumer price inflation came from an increase in food prices, fuels and electricity. Each component contributed 0.1 percentage points.

Inflation gauged by CPIF rate stood at 1.4 percent year-on-year in October, in line with consensus projection and a rise from 1.2 percent in September. In sequential terms, CPIF inflation rose to 0.4 percent from 0.2 percent. CPIF excluding energy was 1 percent year-on-year, the same as in September.

Inflation is expected to accelerate slightly in November; however, it would continue to be on the low side compared to the central bank’s projection, noted Nordea Bank in a research note. Core inflation excluding energy is currently at an annualized pace of about 0.5 percent. This is quite low for Riksbank.

The inflation data underpins the view that additional easing is in the pipeline. The Swedish central bank is likely to extend the QE program and also lower rates in December, according to Nordea Bank.