Swedish price data - an impressive case of deflation

The overall Swedish price index continues to look bad. June price data, consumer prices are due today. It continues to range 0.4 percentage points below the level seen in spring 2012. An impressive case of deflation.

However, Riksbank is more interested in the CPIF, the price index that is calculated under the assumption of constant mortgage rates. This measure looks much better and was 1% above the previous year's level in May. 

"However, what matters is not so much the level of inflation but whether or not the central bank can convince the public that the inflation target it is aiming for is feasible. And Riksbank is a long way off that. It therefore has to take further action", says Commerzbank. 

Now yesterday's EUR weakness, has really hit EUR-SEK. Half of the recovery in EUR-SEK, which Riksbank was pleased to see following the rate decision on 2nd July, has already been retraced. Riksbank nonetheless does not need to take action right away as long as EUR-SEK does not return into the area around 9.20/9.25.