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Swedish inflation likely remained stable in December, domestic inflation pressures to stay modest in 2020

Swedish inflation data for the month of December is set to release next week. According to a Nordea Bank research report, the consumer price inflation is likely to have accelerated to 0.5 percent sequentially, while it is expected to have remained the same at 1.8 percent on a year-on-year basis.

The CPIF inflation is expected to have come in at 1.7 percent year-on-year. Excluding energy, CPIF inflation is expected to have stayed unchanged in the month, but at a slightly higher level, that is 1.8 percent year-on-year. This is also consistent with the Riksbank’s forecast.

Prices of foreign travel surged in December, which is considered normal for the season. However, foreign travel is subject to high uncertainty. Electricity prices dropped towards the end of 2019, while food prices are likely to have stayed the same.

Meanwhile, domestic inflation pressures are expected to stay modest in 2020. The subdued SEK currently affects inflation, but the effects might wane in 2020 as the SEK has stabilized. And inflation might therefore drop.

“If the SEK strengthens, for example in line with the Riksbank’s forecast, inflation may drop significantly. In other words, inflation is still a challenge for the Riksbank, and the forecast of an unchanged repo rate at zero during the coming year will likely be put to the test. As regards the outlook for 2020, our assessments of taxes and duties with an impact on inflation is summarised in the table below”, added Nordea Bank.

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