Swedish September flash inflation review: Still soft

Swedish inflationary pressures remain modest, but the Riksbank is still expected to raise rates in November and eventually take the policy rate to 2.25%.

• September CPIF inflation was 1.5% year on year, while CPIF excluding energy was 0.5%, below the Riksbank’s 0.7% forecast and Nordea’s 0.6% estimate.
• Energy prices added 0.94 percentage points to headline CPIF, above Nordea’s 0.84-point estimate and the Riksbank’s 0.76-point assumption.
• Monthly momentum in core prices eased in August and September after being strong in June and July, leaving core inflation below target.
• Food prices fell instead of rising as expected, goods prices increased more than forecast, and services inflation was slightly lower than estimated.
• The low services reading suggests domestic cost pressures remain contained, although seasonal summer-holiday effects may have depressed prices.

Takeaway: Nordea expects a rate hike in November, no move in December and another hike in February to 2.25%, supported by the Riksbank’s confidence that inflation will rise and by a fragile SEK amid higher global interest rates.