Nomura analysts report that Swedish CPIF and CPIF ex-energy inflation surprised to the downside for a fourth consecutive month in February, with both measures coming in slightly below levels historically consistent with the Riksbank's 2% target. Specifically, flash CPIF inflation was recorded at 1.7% year-on-year (y-o-y), compared to Nomura and consensus forecasts of 1.8%, and the Riksbank's forecast of 1.3%. This follows a previous reading of 2.0%. CPIF ex-energy inflation slowed to 1.4% y-o-y (Nomura: 1.5%, consensus: 1.5%, Riksbank: 1.7%) from 1.7% in January. Both CPIF and CPIF ex-energy rose 0.6% month-on-month (m-o-m) in February, but stronger-than-typical m-o-m inflation in January has pulled up the three-month average [1].
The downside surprise relative to Nomura's forecast was primarily driven by goods, especially clothing and footwear, where prices rose 2.3% m-o-m, compared to Nomura's forecast of a 4.5% m-o-m rise. Household furnishings and equipment prices also surprised to the downside. Statistics Sweden has begun publishing high-level inflation details alongside the flash release, providing more transparency into the drivers of inflation [1].
Looking ahead to March, Nomura analysts highlight oil-related inflation risks, noting that the impact of the conflict in the Middle East on energy prices will be key. Riksbank research suggests that a 10% rise in oil prices leads to CPIF inflation being about 0.2 percentage points higher after one year, assuming prices remain elevated. If oil prices retreat, the inflationary impact would be more limited [1].
Despite recent weak inflation prints and Sweden's ongoing economic recovery, Nomura expects the Riksbank to keep its policy rate unchanged for the rest of the cycle. Inflationary pressures resulting from the oil price shock further reduce the probability of a policy rate cut, according to Nomura analysts [1].
CONCLUSION
Swedish inflation data surprised to the downside in February, but Nomura analysts warn that oil price risks could temper hopes for further rate cuts. The Riksbank is expected to keep its policy rate unchanged, with inflationary pressures from energy prices reducing the likelihood of a cut. Market participants should monitor upcoming data and oil price developments for further direction.