Economic & Financial WeeklyQE2 in line with expectations

US : QE2 in line with expectations
To boost economic recovery and to avert deflation risks, the Fed will buy an additional USD 600 billion in Treasuries by mid-2011. Our view is that the effect from the asset-purchase program will be fairly small and that it in-creases the risk of high inflation in the future, as the economic problems in the US to a large extent are structural. Moreover, the policy measure also increases the risk of overheating outside the US.

Sweden: CPI of 0.3/1.5 expected in October
We forecast a CPI of 0.3/1.5 percent in October and a CPIF of 0.2/1.7, both of which are lower than the Riksbank's forecast. Clothing, mortgage rates and food are all expected to contribute positively. Looking forward, we fore-cast lower underlying inflation on the back of low resource utilisation and a stronger SEK. Food prices are a considerable risk on the upside.

Petter Lundvik

Economist

USA and India

pelu16@handelsbanken.se

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