Swedish October flash inflation review: A downward surprise

Swedish inflation has fallen well below expectations, supporting a December pause while Nordea still expects rate hikes from February.

• October CPIF inflation was 1.1% year on year, while CPIF excluding energy reached only 0.1%, versus Nordea's 0.5% forecast and the Riksbank's 0.6% projection.
• Monthly price momentum in CPIF excluding energy has remained below the Riksbank's 2% target in recent months.
• Energy prices added 1.03 percentage points to annual CPIF inflation, above Nordea's 0.93-point estimate and close to the Riksbank's 1.01-point estimate.
• Services and other goods prices both surprised on the downside, suggesting broad-based weakness, while food prices matched Nordea's expectations.
• The trade-weighted Swedish krona has weakened by around 10% this year, energy prices have risen, and robust economic growth supports a gradual policy normalisation.

Takeaway: Nordea expects the Riksbank to remain on hold in December, then raise the policy rate to 2.25% in February as inflation pressures recover, with the final October figures due on 12 November.