Sweden's core CPIF inflation, excluding energy, rose to 0.6% in July, up from 0.4% previously, according to ING FX Strategist Francesco Pesole. This hotter-than-expected core inflation figure provided a modest boost to the Swedish Krona (SEK) against the Euro, while the headline inflation rate slowed as anticipated from 1.3% to 0.7% [1]. Despite the positive surprise in core inflation, the market's reaction was limited. Pesole notes that markets had already fully priced in a Riksbank rate hike by year-end, which capped the upside for front-end SEK rates [1].
ING argues that, even after adjusting for temporary tax measures that are artificially suppressing prices, the overall inflation outlook does not appear strong enough to justify the market's firm expectations for Riksbank tightening. While acknowledging that hawkish risks have increased slightly, ING maintains its baseline view that there will be no rate hikes before the end of the year [1]. The bank continues to forecast a relatively shallow path for EUR/SEK, targeting 10.80 by year-end [1].
No additional market reactions, analyst opinions, or forward-looking statements beyond ING's outlook and year-end target were provided in the article.
CONCLUSION
Core inflation in Sweden surprised to the upside, giving the SEK a modest lift, but ING does not expect this to prompt Riksbank tightening before year-end. The market's reaction was muted due to prior expectations, and ING maintains a year-end EUR/SEK target of 10.80.