Sweden core inflation to rise in September

The SEK are currently crucial for monetary policy too. At the time of the writing, the trade-weighted exchange rate is almost 2 percent stronger than assumed by the Riksbank. If the Riksbank does not act at the monetary policy meeting in October, the krona is likely to appreciate further.

In such a scenario, the SEK appreciation will have marked consequences for the inflation outlook, something that the Riksbank will probably avoid. Therefore, the Riksbank is likely to take more action, argues Nordea Bank.

A simple estimate* of the exchange rate's effect on inflation suggests that the earlier weakening of the krona explains a large part of the increase in inflation. 

"Sweden core inflation measured by CPIF excluding energy will rise to 1.7% y/y in September. If the forecast proves right, core inflation has risen more than 1 percentage point since early 2014 when it was lowest",  foresees Nordea Bank.