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Sweden’s headline CPIF inflation in August was 2.2%, unchanged from July, while core inflation fell to 1.2% (from 1.3% in July), notes Jonas Goltermann, Developed Market Economist at ING.

Key Quotes

“This was lower than the consensus expectation and the Riksbank’s forecast (published only last week), mainly due to core inflation coming in weaker than anticipated. This was the seventh month out eight this year that the Riksbank’s core inflation forecast has proven too optimistic, despite the central bank continuously shifting its forecast downwards.”

“The decline in core inflation was fairly broad-based, with several components coming in slightly lower than expected.”

“For the central bank, today’s figures are a concern, in particular coming after yesterday’s downward revision to GDP growth. But a couple of poor data points are not enough to shift the Riksbank away from its intention to raise interest rates in December or February, and as discussed, today’s data release is not entirely negative.”

“While a February hike now looks considerably more likely than December, it will take more negative developments to shift the Riksbank further into 2019.”

“We still consider a first rate hike later in 2019 as more likely than not, but are waiting for the Riksbank minutes on Monday to judge how definitive the central bank’s latest guidance really is.”

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