Swedish inflation likely to have decelerated in December – Nordea Bank

The Swedish inflation is expected to have slowed in the month of December. According to a Nordea Bank research report, the CPIF inflation is likely to have dropped to 1.9 percent, which is below the Riksbank’s projection. Inflation is anticipated to decline in 2017 and will be a challenge for the central bank.

Prices of foreign travel will have dominated December. Prices rise during the year-end, an effect which is strengthened by the new measurement method for package holidays. The effect on CPIF is a bit above 0.3 percentage point sequentially. Therefore, foreign travel account for most of the expected rise in CPIF of 0.4 percent.

Food prices are likely to have risen in December, consistent with the development in Germany among others. Longer out, there is basis for stabilization as prices in the global market have dropped. This is significant for the inflation path as they account for a considerable part of the basket of goods.

In December, energy prices dropped, but the level is a bit higher compared to the same month in 2016. Excluding energy, CPIF is expected to have come in at 1.7 percent. In 2017, domestic inflation rose in Sweden. Part of the inflation rise is temporary.

“We believe that the Riksbank will hike rates in October this year. Given our inflation forecast, which is lower than the Riksbank’s view, risk is skewed for a later first move”, added Nordea Bank.

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