Swedish CPIF inflation likely to have come above Riksbank’s forecast in July – Nordea Bank

Swedish CPIF inflation is expected to have come in slightly above Riksbank’s forecast in July. According to a Nordea Bank research report, the CPIF inflation is likely to have reached 2.2 percent in July; however, the positive trend is unlikely to last. The surprisingly high inflation is a welcome breather for the Swedish central bank. Moreover, the Swedish economy is expanding faster than anticipated, which makes additional stimulus measures less likely.

The economic growth of Sweden is mainly driven by increased productivity, which signifies that the Riksbank would have to downwardly revise its projection for unit labor costs. Furthermore, inflation is impacted by temporary factors, notably import price fluctuations and a new methodology for measuring the prices of package holidays.

The weakness of the Swedish krona in the past year or two would indicate through mostly in the inflation data now and during the autumn; however, the krona impact is likely to wane around the turn of the year. This is one main explanation why inflation is likely to be lowered next year than this year, stated Nordea Bank.

Higher taxes and higher energy prices might also be seen as mainly having temporary impacts on inflation. In July, energy taxes were raised, and a new tax on certain chemicals in electronics was introduced. This combined will raise the consumer price inflation by just over 0.1 percentage point. Furthermore, the OPEC intends to cut production to boost oil prices. Also, electricity prices have stayed relatively high in the summer. Meanwhile, food prices are expected to have increased in July, while clothing and footwear prices were impacted by the seasonal summer sales.

“We expect the first rate hike to be sanctioned in the second half of 2018”, added Nordea Bank.

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