Lower-than-expected June Inflation Strengthens Case For August Cut

Swedish June CPIF ex-energy inflation was lower than expected at 2.3% Y/Y (vs 2.5% expected by consensus and the Riksbank’s June MPR, 3.0% prior). The monthly rate was -0.1% (vs 0.1% cons, 0.8% prior).

• In isolation, this makes an August Riksbank cut (which is already the base case amongst markets and the Riksbank’s June MPR policy path) all the more likely.
• SEK has unsurprisingly weakened on release, with NOKSEK 0.3% higher at typing and recovering almost all of yesterday’s losses.
• A first glance at the details shows a moderation in recreation and culture (-0.2% Y/Y vs 1.8% prior) and restaurants and hotels (3.1% Y/Y vs 4.9% prior; -1.4% M/M). This dynamic was expected, with a portion of May’s services price acceleration being reversed in June (as one-off impacts from Taylor Swift concerts and Eurovision drop out of the comparison).
• Package holidays rose 14.5% Y/Y (vs 13.0% prior) and 29.0% M/M, but nonetheless pulled down the annual CPI inflation rate by 0.23pp.
• Upside risks to food prices were not realised, with that category moderating to 1.1% Y/Y (vs 1.5% prior) and -0.1% M/M.
• Electricity and fuel prices fell 12.7% Y/Y in June (vs -8.2% prior), helping overall CPIF undershoot consensus at 1.3% Y/Y (vs 1.6% cons, 1.5% Riksbank and 2.3% prior).