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Fast Comment SwedenInflation in July: better in line with the Riksbank after last month's miss

  1. Above the Riksbank's target
  2. Question marks surrounding CPIF excluding energy
  3. But underlying inflation holds up OK - we keep our Riksbank call
Above the Riksbank's target
The July CPI data shows CPIF inflation at 2.2 percent, thereby staying above the Riksbank's target. The outcome was fully in line with our forecast and market expectations, but marginally above the Riksbank's forecast. However, CPIF excluding energy (CPIFXE) decreased to 1.3 percent, maintaining a gap to the Riksbank's forecast path after the central bank overestimated inflation in June (see tables and graphs).
Question marks surrounding CPIF excluding energy
Compared to our forecast, CPIFXE appears to be a disappointment. Some of the forecast error should however be attributed to larger-than-usual summer sales of clothing and shoes. As these are weather related, there is a good chance of a full rebound in the coming months. One eye-catching price drop that will stay with us, however, is cheaper dental care, which was a significant drag on today's outcome.
But underlying inflation holds up OK - we keep our Riksbank call
More broadly, not all indicators of underlying inflation decreased like CPIFXE. We do not consider this downside surprise substantial enough to change our forecast for higher underlying inflation later this year. Hence, we continue to expect a rate hike from the Riksbank at its December meeting.

Goods dragged down by clothing sales, while core was better than forecast. Services held back by price fall in dental care. 

Further deceleration in core services... 

 ...but some indicators of underlying inflation still healthy


Johan Löf

Senior Economist


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