Swedish inflation likely to have picked up in February – Nordea Bank

Swedish inflation is likely to have picked up in February, however, the rise would be temporary and inflation would continue to be a long-term challenge for the central bank, noted Nordea Bank in a research report. Inflation had a messy beginning to 2019. The January outcome was one of the biggest surprises ever. CPIF had come in at 2 percent in January. A turbulent beginning often signifies that the mess continues.

“That said, our call for February CPIF is 2.2 percent, 0.2 percent point below the Riksbank’s view. Excluding energy, our forecast is in line with the Riksbank’s estimate at 1.7 percent, up from 1.4 percent in January”, said Nordea Bank.

The below expected January print was because imported inflation came in lower than anticipated. Models and indicators point to a rise for the months ahead and imported inflation is likely to be higher in February.

Domestic and services inflation were consistent with expectations. However, it is nothing the central bank should be happy about as they are modest and too low. Wage rises continue to be moderate and unit labor cost contained. Services inflation is expected to remain fairly stable in the years ahead.

Food prices are likely to have risen in February following the low January reading. Fuel prices increased as well while electricity prices have come down as winter is gradually turning to spring.

“Risks to the February CPIF are on the downside as it is uncertain whether the weak SEK will kick-in and boost inflation”, added Nordea Bank.