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Fast Comment SwedenInflation in March: Riksbank to delay rate hike

  1. Inflation back in line with Riksbank forecast
  2. Driven by surprisingly high energy prices; underlying inflation also looks decent
  3. Riksbank to delay rate hike, as core inflation disappointment tips the balance
Inflation back in line with the Riksbank's forecast
Swedish consumer price data for March showed that CPIF inflation increased from last month's 1.7 percent to 2.0 percent y-o-y. That was slightly lower than our estimate, but in line with the most recent Riksbank forecast from its February Monetary Policy Report (Handelsbanken 2.2 / consensus median 2.05 / Riksbank 2.0). Turning to CPIF excluding energy, the increase was a meager 1.5 percent y-o-y, significantly below the Riksbank's and our own forecast.
Driven by surprisingly high energy prices; underlying inflation still looks decent
All in all, today’s outcome does not provide firm evidence that the positive trend in inflation is intact. As we have been arguing, the significant disappointment in January was more about a technical effect of CPI basket reweighting, rather than weak price changes. Core services prices were surprisingly strong today on a m-o-m basis and indicators for underlying inflation picked up. However, CPIF excluding energy remains well below the Riksbank's forecast.
Riksbank to delay rate hike, as core inflation disappointment tips the balance
With CPIF excluding energy, an indicator favoured in the Riksbank's communications, being lower than expected and March's details not fully confirming the positive inflation trend, we conclude that the Riksbank is likely to delay the timing of its first rate rise. We expect the Riksbank to lower its rate forecast at the next policy meeting (published April 26). thus decreasing the likelihood of a Q3 rate hike. We now expect the Riksbank to lift rates in December instead of September.

 CPIF excl energy lower than forecast, despite high service price increases

 Riksbank's CPIF forecast spot on, but that was due to surprisingly high energy prices

 The less volatile CPIF excluding energy below the Riksbank forecast as easter effect in air fares did not materialise

 Indicators of underlying inflation picked up again...

...and another positive signal was the stabilisation in core service prices

No Easter holiday effect in air fares, despite the bank holiday's falling in March this year


Johan Löf

Senior Economist


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Fast Comment Sweden


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Fast Comment Sweden