Swedish inflation slows slightly in August, Riksbank to hike rates in Q4 2018

Swedish CPIF-inflation slowed in August; however, it was less than expected. CPIF- inflation came in at 2.3 percent year-on-year in August, as compared with consensus and Riksbank’s expectations of 2.2 percent. Excluding energy, CPIF stood at 2 percent year-on-year, in line with the Riksbank’s projection.

Prices for package travel dropped less than expectations. These prices are likely to normalize and drop more in the months ahead. Meanwhile, ticket prices for foreign flights were slightly lower than expected, which signifies that foreign travel in total subtracted 0.63 percentage points from the CPIF.

Food prices dropped less than forecast. Prices for home electronics rose in contrast to the projections. There were some small surprises too, equally disturbed between imported and domestic inflation, noted Nordea Bank in a research report.

Inflation came in higher than Riksbank’s expectations, which would be welcomed by the bank. The deviation from the central bank forecast is quite small though. The figures released today do not change much for the monetary outlook. The SEK game continues to be on, and the central bank sees difficulties in moving well ahead of the ECB. According to Nordea Bank, the central bank will hike its rate in the fourth quarter of 2018.

Inflation measured by consumer price index came in at -0.16 percent in the month, as compared with consensus expectations of -0.3 percent and the prior month’s print of 0.5 percent. On a year-on-year basis, consumer price inflation slowed slightly to 2.1 percent in August from 2.2 percent in July. Consensus expectations were for the inflation to have stayed at 2.2 percent. However, it was in line with the central bank’s projection.

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