SWEDEN: Electricity Prices Weigh On Headline, But Core Inflation In Line

The Swedish August CPI outcome is consistent with the Riksbank cutting rates at each of its three remaining meetings this year, but is not yet enough to tempt the Executive Board into a faster easing pace (i.e. 50bp cuts). Although CPIF at 1.2% Y/Y (vs 1.7% prior) was below consensus of 1.4% and the Riksbank June MPR projection of 1.7%, CPIF ex-energy was in line with analyst and the Riksbank’s forecasts at 2.2% Y/Y (vs 2.2% prior).

• The Riksbank’s June MPR forecasts CPIF ex-energy to fall below the 2% target in September. Such inflation outcomes may increase the risk of inflation expectations falling further below the 2% target, which may influence the pace of easing into 2025 as rates appraoch so-called neutral.
• The downside surprise to headline inflation likely came from electricity prices. A monthly fall was expected by analysts, but perhaps not as large as the 6.1% M/M outcome (which pulled annual inflation 31bps lower).
• Other components appear to have behaved in line with expectations and seasonal norms: Clothing and footwear prices rose 4.6% M/M (vs -4.1% prior), implying an annual rate of 3.2% Y/Y (vs 2.5% prior).
• Meanwhile, food prices fell 0.4% in August (though the annual rate ticked up to 1.4% Y/Y vs 1.1% prior).
• The recreation and culture component fell 2.0% Y/Y, with prices falling 0.4% on an annual basis (vs -1.3% in July).