Swedish inflation likely to have slowed slightly in January

The Swedish January inflation is set to be released next week. According to a Nordea Bank research report, the CPIF inflation is likely to have slowed marginally to 1.8 percent from December’s 1.9 percent. It is 0.1 percentage point lower than the central bank’s projection for the headline figure but consistent with the central bank’s view with energy excluded.

There were many sales in January and many prices were adjusted in the beginning of the year. Furthermore, the CPIF basket is updated. This makes the projection for January more uncertain than other months. However, risks appear to be balanced. On a sequential basis, CPIF is expected to have dropped 0.7 percent, stated Nordea Bank.

Seasonal price cuts on clothing, foreign travel and footwear are expected to have mainly driven the decline. Food prices are expected to have been unchanged after the rise in December. Energy prices have risen and are likely to have added 0.1 percentage point to the sequential figure of CPIF.

Going forward, inflation excluding energy is expected to decline further. Modes pay-rises, low imported inflation and less price hikes than last year for administrative set prices add to the decline, said Nordea Bank.

Therefore, headline inflation with energy prices appears higher and closer to the target of 2 percent in the months ahead. But this is uncertain as energy prices a volatile. For example, oil prices have declined by as much as 10 percent since the peak in mid-January.

“Core inflation below the Riksbank’s forecast, coupled with lower GDP growth and uncertainty related to the housing market, will keep the Riksbank side-lined throughout 2018, we think”, added Nordea Bank.

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