Swedish CPIF inflation likely to have accelerated in June

Swedish CPIF inflation is likely to have accelerated in June on a year-on-year basis. According to a Nordea Bank research report, the CPIF inflation is likely to have risen to 2.4 percent in June. Of the expected figure, almost one percentage point is linked to higher energy prices. Unrest in many oil-producing nations is one of the main reasons why oil prices have increased. Furthermore, dry weather in Sweden has added to uncertainty about water reservoir levels, which has led to increased electricity prices. Forward contracts imply that prices of both electricity and oil might fall in the spring of 2019, stated Nordea Bank.

Excluding energy, inflation is expected to have remained stable at 1.5 percent in June. Price growth is viewed to be consistent with June last year, suggesting higher prices of foreign travel and summer sales of clothing and footwear.

Near term volatile factors might dim the outlook and the direction of inflation trends. Lower energy prices are no further away than OPEC turning up the taps or rainfall in Northern Sweden, stated Nordea Bank. The central bank might possibly want to see a more stable uptrend in inflation before it is ready to pull the interest rate trigger.

“Like previously, the overall picture is low inflation for structural reasons that are beyond the Riksbank’s control. The inflation path is instead dominated by exchange rate fluctuations and the two components that are sometimes exposed to supply shocks – energy and food. It will undoubtedly be an exciting and “hawkish” second half-year, but we still consider a rate hike to be a long way off”, added Nordea Bank.