Swedish August CPIF preview: Sideways

Swedish CPIF inflation data for the month of August is set to be released next week. According to a Nordea Bank research report, inflation gauged by CPIF is likely to have remained unchanged at 2.2 percent in the month, slightly below Riksbank’s view.

Excluding energy, CPIF is likely to have come in at 1.2 percent. The deviation from Riksbank’s forecast is small and might diminishing in the months ahead.

Next year, inflation is expected to be significantly lower than the central bank’s forecast. Energy prices at present contribute about 1 percentage point to CPIF inflation year-on-year. When this effect wanes, and the boost of the past year’s weakening of the SEK disappears, inflation might drop back.

Riksbank is expected to lower its inflation forecast in its October report and in consequent reports, sweeping away the grounds for rate hikes. The first hike is expected to be seen in the fourth quarter of next year, stated Nordea Bank.

Meanwhile, energy prices are expected to have risen further and contributed about 0.1 percentage points to CPIF inflation. Food prices are likely to have fallen after the sharp rise seen in July. Also, seasonal price hikes on clothing and footwear is expected after the summer sales ended in July. The main driver on the downside is prices for foreign travel, consistent with developments last year.

“A detail is prices for public transport. We forecast them to bounce in August and add some 0.05% point as the period with free tickets for young people ended in mid-August. This will lift the September CPIF as well, but less than in August”, added Nordea Bank.