Swedish CPIF inflation came in at 0.0 percent on a year-on-year basis in May, as compared with consensus expectations of -0.4 percent and Riksbank’s forecast of 0.4 percent. Excluding energy, CPIF came in at 1.2 percent year-on-year, above consensus expectations of 0.8 percent but below Riksbank’s forecast of 1.7 percent.
The main upward surprises were seen in services, as some of the very low readings in April rebounded in May, such as mobile phone services, car rental, TV and music services etc. prices for books continued up in May after the sales in March, adding 0.04 percentage point to CPIF month-on-month, which was a surprise. Furthermore, food prices rose while they were expected to remain unchanged, noted Nordea Bank in a research report.
Of the CPI basket, 2.9 percent was not based on actual prices. Instead, total CPI year-on-year was used for foreign travel, cultural services and sports events etc. This was slightly less than in April and also less than expected.
“All in all, there is no doubt that inflationary pressures are low, despite the higher than expected May reading. With the low resource utilisation, price pressures will remain low for foreseeable future. We expect the Riksbank to keep the repo rate unchanged at 0.0 percent during 2020 as well as 2021, but to expand the QE programme”, added Nordea Bank.
