Key Moments
- March CPIF inflation slowed to 1.6% year-over-year versus a market expectation of 2.2%, according to TD Securities.
- CPIF ex-Energy fell to 1.1% year-over-year, undercutting the 1.5% market forecast and highlighting broad underlying softness.
- TD Securities argues that, unless the latest inflation weakness reverses quickly, the Riksbank may postpone interest rate increases despite its recent hawkish tilt.
Inflation Surprise Undercuts Market Expectations
Analysts at TD Securities report that Sweden’s March inflation data delivered a notable downside surprise, challenging expectations for the policy outlook at the Riksbank. Both CPIF and CPIF ex-Energy for March came in below consensus, with the weakness concentrated in specific consumer categories.
They note that the flash reading for CPIF eased, while underlying inflation excluding energy also moved lower, diverging from the market’s anticipated path.
| Inflation Measure | March Outcome | Market Expectation | Change |
|---|---|---|---|
| CPIF (y/y) | 1.6% | 2.2% | Decelerated by 0.1 percentage point |
| CPIF ex-Energy (y/y) | 1.1% | 1.5% | Dropped by 0.3 percentage point |
Category Drivers: Food and Recreation Weigh, Petrol Offsets
According to the analysts, the downside surprise was primarily driven by weaker prices in Food and in Recreation, Sport & Culture. These components exerted significant downward pressure on both the headline and core measures of inflation.
They add that higher petrol prices provided a counterbalance, partly offsetting the broader weakness at the headline CPIF level, even as underlying categories remained soft.
Policy Implications for the Riksbank
TD Securities emphasizes that the Riksbank had recently adopted a more hawkish stance at its previous policy meeting. However, the analysts argue that the latest inflation outcome poses a challenge to that positioning.
“Flash inflation for the month of March surprised materially to the downside in Sweden, with CPIF decelerating a tick to 1.6% y/y (mkt: 2.2%), while CPIF ex-Energy dropped 0.3ppt to 1.1% y/y (mkt: 1.5%).”
“The decline in inflation came principally from lower Food and Recreation, Sport & Culture prices, while petrol prices of course provided an offsetting boost to the headline CPIF measure.”
“The Riksbank had been leaning in a hawkish direction at its last meeting, but this weak inflation data, if not reversed, might keep them on the sidelines for longer.”
The analysts conclude that, unless there is a swift rebound in inflation, the central bank is likely to delay rate hikes relative to what had been signaled previously.
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