Sweden's core gauge, CPIF excluding energy, rose 0.5% from a year earlier in September, according to a preliminary read from Statistics Sweden. That print came in a touch below both the 0.7% median in a Bloomberg survey and the Riksbank's own projection. Headline CPIF landed at 1.5% year on year, in line with expectations. The central bank's Sept. 24 forecast still projects inflation returning to target later this year.
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The Riksbank has kept its key rate at 1.75% for the past year, the lowest in the European Union. At last month's meeting, policymakers said the odds of a quarter-point hike this year have increased as the economy improves, while cautioning that the Iran war could still fuel an inflation bump. Governor Erik Thedéen put it this way: it remains appropriate to "sail in full sail" for now, but "we probably need to reduce the sail area" at the November gathering.
Bloomberg Economics' Selva Bahar Baziki wrote, "Sweden's September inflation flare was hotter than we expected, but volatile energy prices and changes to fuel-tax regimes explain much of the headline heat. We expect the Riksbank Executive Board to hike rates twice, starting in November." Nordea's Torbjörn Isaksson said September's core outcome shows price pressures are still modest, but expects the bank "will nevertheless hike rates in November." He added, "The central bank can be confident that inflation will rise going forward." Nordea also anticipates another increase to 2.25% in February. Swedbank's Linn Hansen noted food prices were softer than expected in September, but said pricier raw materials combined with a softer krona are now set to push prices higher. She added that a depreciating currency should lift goods-price inflation, especially next year.
If the board follows through in November, and with some forecasters calling for a second move in February, borrowing costs could edge higher into early 2025. A softer krona and possible goods-price pressure are also on the radar. That mix can sway bond yields, rate-sensitive stocks and Swedish-currency exposures, so it is worth watching the November decision and how the inflation path stacks up against the Riksbank's target.
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