Sweden’s February inflation remains above Riksbank’s forecast

Sweden’s CPIF, stripping energy, reached 1.5% y/y and 0.2% m/m in February, more than Riksbank’s forecast. Inflation in Sweden is thus showing life. Along with this, the trade-weighted exchange rate that is close to the central bank’s projection should be welcomed by the Riksbank. The central bank is expected to extend the bond purchase program for H2 2016 to avert the SEK to appreciate too fast longer out. However, the above expected inflation lowers the chance for that to happen.

Sweden’s CPI inflation reached 0.3% m/m and 0.4% y/y, as compared with central bank’s forecast of 0.2% and 0.3%, respectively. Clothing and footwear prices were the main surprise that contributed 0.3 percentage point to the CPIF in month-on-month basis, as compared with the expected 0.1 percentage point contribution. Furthermore, electricity prices did not increase the CPI as compared to the expectation. Meanwhile, ticket prices for foreign flights unexpectedly declined.