Swedish inflation accelerates above central bank’s forecast in April

Swedish inflation came in above the central bank’s projection for the month of April. The CPIF-inflation came in at 2 percent year-on-year, 0.2 percentage point above the central bank’s forecast. But there is no reason to change the view on inflation and on Riksbank, noted Nordea Bank in a research report.

CPIF-inflation, excluding energy rose to 1.6 percent year-on-year from 1.5 percent year-on0year in March. This also came in slightly higher than expected. Inflation came in higher than expected due to the low reading recorded in March, such as prices for foreign travelling. These prices contributed 0.25 percentage point to CPI month-on-month, compared with Nordea Bank’s projection of 0.13 percentage point. These prices are expected to drop back in May.

Prices of food dropped while they were likely to rise slightly. Food price inflation is still expected in the future, noted Nordea Bank. Imported goods and services prices were up in the month. The increase was slightly sharper than expected.

Prices on books rebounded slightly more than expected after the sales in March, while it was anticipated to have risen more gradually in April and May. Overall, the main surprise was of temporary character.

“We still see CPIF-inflation at 1.8 percent y/y in May. Thus, we keep our view that CPIF-inflation will be 0.1-0.2 percent point above the Riksbank’s view in the coming months”, added Nordea Bank.

The long-term challenges continue to be there for the bank. Any tightening measures appear to be a long way off. The Riksbank is expected to hike its rate in the second half of 2018.