Key Moments
- Swedish August CPI, CPIF and CPIF-XE all came in below Danske Research Team forecasts, with the downside surprise described as broad-based.
- Market-implied odds of a Riksbank rate hike in September were around 30% last week, but most of that probability was erased after the inflation release.
- Danske Research Team now expects the Riksbank to deliver its first rate hike in November, with EUR/SEK facing upward pressure.
Inflation Miss Alters Policy Expectations
Danske Research Team reported that softer-than-expected Swedish August inflation has significantly reduced market expectations for a Riksbank rate increase at the upcoming September meeting. All main inflation measures – CPI, CPIF and CPIF-XE – fell short of the bank’s projections, and the surprise was characterized as broad-based across categories.
The weaker data prompted markets to scale back pricing for near-term tightening. According to Danske Research Team, markets had been assigning roughly a 30% probability to a September rate move as recently as last week, but most of that implied chance disappeared following the inflation print. Danske Research Team now anticipates that the Riksbank will implement its first rate hike in November instead.
Detailed August Inflation Figures
August flash inflation figures in Sweden undershot Danske Research Team estimates across the board. The reported outcomes versus forecasts and prior readings were as follows:
| Indicator | Actual | Danske forecast | Prior |
|---|---|---|---|
| CPI (y/y) | 0.28% | 0.59% | 0.18% |
| CPIF (y/y) | 0.72% | 1.00% | 0.72% |
| CPIF-XE (y/y) | 0.52% | 0.74% | 0.57% |
Danske Research Team highlighted that
“In Sweden, August flash inflation came in below expectations, with CPI at 0.28% y/y (Danske: 0.59%, prior: 0.18%), CPIF at 0.72% y/y (Danske: 1.00%, prior: 0.72%) and CPIF-XE at 0.52% y/y (Danske: 0.74%, prior: 0.57%).”
The composition of the data also underscored the breadth of the downside surprise. As Danske Research Team noted,
“Both goods and services came in below expectations, while food and energy were broadly in line with forecasts.”
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