Sweden: Focus on CPI inflation today - TDS

Analysts at TD Securities suggest that Sweden’s July CPI seems to be set up for another month of CPIF ex-energy coming in below the Riksbank's forecast, but headline CPIF to come in above target.

Key Quotes

“We look for CPIF ex-energy to edge lower to 1.2% y/y in July, compared to the Riksbank's forecast of 1.44% in the July MPR. The Riksbank seems to have forecast a fairly sharp pick-up in the m/m trend for underlying inflation, which is unlikely to pan out in our view, raising the risk of yet another string of downside surprises.”

“For CPIF, we should see more support from energy prices, pushing the July print a tick higher to 2.2% y/y, in line with the Riksbank's forecast. As we've written previously, we think that inflation surprises are going to be the primary driver of the Riksbank's reaction function through the rest of the year.”

“So now we'll need to watch for further guidance from the Riksbank as to whether it reacts primarily to it's formal policy target, CPIF, likely sitting above 2% through the remainder of the year, or whether it's more concerned about another streak of downside misses to CPIF ex-energy.”