Swedish consumer price inflation likely slowed down sequentially in May – Nordea Bank

The Swedish consumer price inflation is likely to have slowed in sequential terms in May. According to a Nordea Bank research report, the CPI is likely to have dropped to 0.1 percent sequentially in May, while the CPIF is expected to have dropped to 1.7 percent year-on-year from 2 percent in the prior month. This projection is consistent with the Riksbank’s view.

This year, the visibility has been clouded by volatile prices of foreign travel and led to sharp fluctuations in inflation. For instance, the CPIF excluding energy was as low as 1 percent year-on-year in March, recovering to 1.6 percent year-on-year in April.

Stripping foreign travel, core inflation has remained rather stale up to April at about 1.4 percent, reflecting current inflationary pressures. Even if the worst turbulence is over, travel prices are a wild card in May too. Prices of foreign travel are likely to have fallen markedly after the sharp increase in April. Domestic travel prices are also a wild card, with a stable rise since the turn of the year. Pattern of recent years indicate that they could decline suddenly, noted Nordea Bank.

In all, May is comparatively a calm month with modest price changes. Food prices are likely to have risen slightly, with fuel prices indicating a drop. CPIF, excluding energy, is expected to have come in at 1.4 percent year-on-year in May, 0.1 percentage point above the Riksbank’s view. Meanwhile, the CPIF print including energy is expected to have come in at 1.7 percent and would be in line with the central bank’s view, stated Nordea Bank.

“We see the first rate hike in October 2018 and a negative repo rate of -0.25 percent by the end of 2018”, added Nordea Bank.