Modest Upside Surprise In Dec CPI Keeps Pressure On Riksbank To Lean Hawkish

Sweden’s December core and headline CPIF prints were higher-than-expected, on both an annual and monthly basis.

• This will keep pressure on the Riksbank to maintain its hawkish leaning at the Feb 1 meeting. Still, the bank is expected to leave its policy rate unchanged come the end of that gathering.
• SEK initially strengthened a little vs the EUR and NOK, but EUR/SEK has since reversed to trade a touch higher on the day, given expectations for no further Riksbank tightening.
• Headline inflation is expected to rebound in January as base effects wear off, while core should continue to steadily moderate.
• CPIF-ex energy printed at an unrounded +5.29% Y/Y (vs +5.2% cons, +5.4% prior). This means the forecast error term between the actual December print and the Riksbank's November MPR projections fell to a rounded 0.3pp (vs 0.5pp in November).
• Electricity prices rose on a monthly basis, but fell -38.9% Y/Y, helping pull down the headline rate to +2.29% Y/Y (vs +2.2% cons, +3.6% prior). Electricity price movements met broader expectations.
• The press release notes that package holidays (+11.2% M/M) and transport services (+7.5% M/M) rose on the month, as is common in December, while several core goods categories (furnishing and household equipment, +1.0% M/M and clothing, +2.8% M/M) also rose following November's downside surprise.