Swedish inflation likely to have accelerated year-on-year in April

Swedish inflation measured by CPIF is expected to have accelerated to 1.9 percent year-on-year in the month of April, noted Nordea Bank in a research report. This projection assumes an even weaker krona. The trade-weighted krona rate is expected to have remained stable at 116 over the projection period through December 2019 versus 113 previously, noted Nordea Bank.

This suggests that CPIF inflation is expected to stay close to 2 percent until mid-2019 and then fall back. Underlying inflation excluding energy would pick up to close to 2 percent around the turn of the year and then fall towards the end of 2019.

Higher inflation later in 2018 is significant for markets and might boost rate hike expectations. But much implies that it is not sufficient for a rate hike to be on the cards. Partially because the mix is not optimal with primarily rising prices of imported goods and services.

Fuel prices are more or less directly affected by the krona’s softness. Otherwise the impacts on inflation in April are restricted. April is instead dominated by prices of foreign travel. Air taxes were increased with effect from April, which raised the CPIF by less than 0.1 percentage point, stated Nordea Bank.

Fuel price rises were nearly completely countered by lower electricity prices. Book prices are expected to be up after the end of the book sale in March, whereas food prices are expected to have remained stable.

“Our CPIF forecasts including and excluding energy of 1.9 percent and 1.4 percent, respectively, are fully in line with the Riksbank’s forecast. The risks to the April CPIF reading are balanced”, added Nordea Bank.

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