Sweden’s inflation decelerates in September, Riksbank may extend bond-buying program to H1 2017

Sweden’s inflation gauged by CPIF slowed in September on year-on-year basis. It came in at 1.2 percent, below the consensus projection of 1.5 percent and slowed down from 1.4 percent in the prior month. It was 0.4 percentage points below the central bank’s projection.

CPIF excluding energy also came in low at 1 percent year-on-year, the lowest reading since April 2015 and 0.5 percentage points below the Riksbank’s projection. On a sequential basis, CPIF inflation came in at 0.2 percent, as compared with -0.1 percent in August. Consensus expectations were for a rise of 0.5 percent.

Inflation measured by CPI also slowed in September. On a year-on-year basis, CPI inflation slowed to 0.9 percent from 1.1 percent in August. It was below consensus projection of 1.2 percent and Riksbank’s forecast of 1.4 percent. On sequential basis, CPI inflation rose to 0.17 percent in September from -0.1 percent in August. Consensus projection was for a rise of 0.5 percent.

In recent months, inflation has shown quite a weak trend. This is because of imported inflation declining as expected while domestic inflation has began easing as well, in contrast to projection of an upturn, said Nordea Bank. Low domestic inflation is possibly because wage rises are not rising as they normally do in a strong economy, added Nordea Bank.

Today, inflation result is disappointing news for the Swedish central bank. It underpins the view that the Riksbank would extend the government bond purchasing program for the first half of 2017. But, additional stimuli measures cannot be ignored.

Food prices came in below projection. Moreover, prices for internet and telephone services, along with prices for foreign travelling came in below expected.