Swedish central bank likely to lower policy rate from -0.35% to -0.45% at next meeting

Swedish December CPI inflation remained firm at 0.1%oya, weaker than Riksbank forecast. Further worsening the central bank concern was the CPIF inflation that dropped a tenth to 0.9%oya and CPIF inflation excluding energy also decreased a tenth to 1.3% ya.

The Riksbank left its policy unchanged on December 15, despite low November inflation and a drastic decline in oil prices. Further the bank stated that the inflation will rise on strong growth outlook as the central bank forecast shows CPIF inflation returning to 2 percent by the end of 2016.

"The low December CPI reading and the further decline in underlying inflation are in our view significant setbacks for the Riksbank, and we now expect the Swedish central bank to act at its next meeting (February 11), lowering the policy rate from -0.35% to -0.45%" - JP Morgan