The Swedish CPIF inflation eased in January, coming in below expectations. On a year-on-year basis, CPI inflation came in at 1.2 percent, a deceleration from 1.7 percent in December. Consensus expectations were for inflation to have eased to 1.6 percent, while Riksbank had projected 1.5 percent. Excluding energy, CPIF inflation came in at 1.6 percent year-on-year, below Riksbank’s forecast of 1.9 percent. The consumer price inflation decelerated to 1.3 percent from 1.8 percent.
The effect of the updated basket of goods and services cut the CPI by as much as 0.40 percentage point on the month, which was more than expected. The effect on the year-on-year reading is less, though, at -0.14 percentage point. The effect on the year-on-year figures will last throughout 2020.
There were several surprises on the downside, related to imports and domestic inflation. The prices for hotels fell and negatively contributed 0.09 percentage points to the CPIF month-on-month figure, which came in at -1.44 percent.
“These prices will probably rebound in the coming months, but the low January reading will make us revise down the inflation forecast for 2020. We also note that food prices dropped more than we had expected. All in all, January inflation was a cold shower for the Riksbank. Core inflation is low and should drop further, and headline inflation will drop even more on the back of the plummeting energy prices. For now we stick to our forecast that the Riksbank will stay on hold, but the risk for the bank taking stimulus measures has definitely increased”, added Nordea Bank.
