Sweden's inflation impulses will start to fade soon

Sweden's September CPI rose 0.14% points more on the month than expected. The main surprises were higher than expected prices on some mainly imported goods, such as furniture, toys, sport equipment etc. 

Ticket prices for foreign flights, also highly dependent on the exchange rate, and heating costs (other than electricity) were somewhat higher than forecast too. Fuel prices dropped sharply and food prices edged down. The seasonal price hikes on clothing and footwear came out as forecast too, lifting the CPI by almost 0.4% point.

"Much of the surprises on the upside seem to be related to the weaker SEK, boosting inflation somewhat more than expected. However, as the SEK has stabilised this year and started to strengthen recently, much suggests that the inflation impulses will start to fade soon", says Nordea Bank.

This underlines the importance of the SEK. The SEK strengthened further after the September inflation readings were released and is at the time of writing 2.8% stronger than the Riksbank's forecast (trade weighted, KIX).

The Riksbank has recently expressed concern over the exchange rate recently. Therefore, the Riksbank will take more action at the October meeting.