Swedish CPIF inflation rises below Riksbank’s forecast in February

Swedish CPIF inflation came in well below the central bank’s projections. On a year-on-year basis, the CPIF inflation came in at 1.9 percent in February, as compared with Riksbank’s forecast of 2.4 percent. Stripping energy, the CPIF inflation came in at 1.4 percent on a year-on-year basis, 0.3 percentage point below the central bank’s forecast. The soft SEK is not feeding through while domestic inflation continues to be modest. Therefore, inflation is low despite the weak SEK, which means trouble for the Riksbank.

Delving into details, prices for clothing and footwear and prices for foreign travel were evidently lower than forecast, explaining the deviation from the forecast. Food prices were, on the other hand, above expectations.

As for foreign travel, package travel contributed only 0.07 percentage points to the CPIF sequential print. Statistics Sweden has increased the number of destinations for package travelling in the survey, which appears to be the reason for the lower than expected outcome.

Overall, February CPIF was below expectations but consistent with long-held view of low inflation being a long-term challenge for the Riksbank.

“The next rate hike is distant, we think, and the low inflation in the beginning of the year reinforces that view”, said Nordea Bank in a research report.