Swedish inflation data for the month of November is set to release next week. According to a Nordea Bank research report, inflation will continue to undershoot the central bank’s view.
“Our call for November CPIF at 1.5 percent y/y, the last reading ahead of the Riksbank’s monetary policy meeting, is 0.2 percent point lower than the Riksbank’s forecast. If our forecast proves right, it rebuts the Riksbank’s view of a swift rise in inflation”, said Nordea Bank.
Along with soft economic trends, this challenges the central bank’s plans to raise the interest rates. However, the Riksbank has sent a clear signal of hiking rate in December, so it will quite simply be difficult for the bank to back away from the rate hike plans. It is not a done deal, but the central bank is expected to hike rates on 19 December by 25 basis points to 0.0 percent.
Meanwhile, CPIF is expected to have remained the same on a sequential basis. Seasonal price cuts for foreign travel is the main driver on the downside. Prices for travel are associated with the usual uncertainty, not lease related to the new method for package travel. Prices for clothing and footwear as well as for energy rise. Prices for food appear to have levelled out and they seem to be unchanged in November.
October had recorded a fall in the costs for depreciation, that is, expenditure that is to reflect the cost of keeping a house in an unchanged condition. This fall reduced the CPIF figure by 0.06 percentage point on a monthly basis in October and was linked to lower prices of building materials.
“Perhaps DIY centres have cut prices for sale campaigns, which in turn may be driven by more moderate economic activity. However, we expect costs for depreciation to rise again in November and December”, added Nordea Bank.
