Swedish inflation rebound keeps a Riksbank hike in play
Sweden’s September inflation rebound keeps a Riksbank rate hike in play, but softer-than-expected underlying price growth offers little reason to accelerate tightening.
Granted, preliminary CPIF inflation rose from 0.7% to 1.5% YoY, matching consensus. Excluding energy, however, inflation remained at 0.5%, below both economist forecasts and the Riksbank’s 0.7% projection. In our view, this leaves the broad policy outlook intact while providing a modestly negative signal for the krona.
The monthly figures reinforce that distinction. CPIF rose 0.9%, following August’s final reading of −0.2%, but prices excluding energy increased just 0.1%, against expectations for 0.3%.
Both core readings landed at the bottom of their survey ranges, while CPI also undershot consensus, rising 1.1% YoY against a 1.2% forecast. The divergence between headline and ex-energy inflation points to energy driving the rebound. The expected strengthening in underlying inflation, meanwhile, failed to materialise.
That said, the Riksbank’s tightening bias rests on more than the latest inflation reading. Stronger activity, a weaker krona and continued supply shocks informed September’s signal that rate increases would likely begin this year.
Temporary fiscal measures, like lower VAT on food, also depress measured inflation, with the bank judging inflation adjusted for those effects to be closer to 2%. The low core reading therefore does not, by itself, establish weak domestic demand. Nor does today’s miss rule out higher energy costs feeding into broader prices as the economy strengthens.
On balance, these figures are unlikely to derail the Riksbank’s tightening plans, but they give policymakers some room for patience.
A November hike remains possible, although today’s release adds little conviction around that timing. For SEK, the surprise is modestly negative: the anticipated headline rebound provides no fresh hawkish impetus, while softer core inflation could temper expectations for near-term tightening.