**As seen in Risk In The Week report 07/09/23, subscribe at cablefxm.co.uk/reports
May underlying inflation eased to 6.7% Y/y from the prior 7.6%, this was in line with the consensus as prices move further away from its peak of 10.2% back in December. Headline CPI printed at 9.7% Y/y, down from the prior 10.5% but above the consensus median of 9.5%. The metric excluding energy accelerated to 0.7% M/m from the prior 0.4%, food prices posted a second consecutive month of declines at -0.4%, restaurant prices rebounded at 3.3% vs the prior month. Most of the slowdown was due to temporary food discounts and base effects from caused by last year’s energy crisis. A recent Bloomberg poll showed economists projecting CPIF rising by 6.0% Y/y in 2023 before slowing to 2.4% in 2024, headline prices are seen accelerating by 8.3% Y/y this year. Looking ahead, the inflation picture isn’t constructive as the EUR/SEK rises to record highs, the devaluation of the krona vs the euro will keep import prices elevated. We remind you that the eurozone stands for 60% of Swedish global trade. This is one of the main reasons why desks see the Riksbank hiking again in September, the consensus expects the Repo Rate reaching 4.0%, 25bps higher than where it currently is. Analysts at Swedbank said that services prices are likely to push higher while food prices are expected to stabilize, they pencil underlying inflation printing at 8.0 Y/y and the headline at 9.1%. Swedbank is now projecting another rate hike in November and said rate cuts will have to wait a little longer, they pointed at a weaker krona and the inflation risks it brings.
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