CPI fell by 0.2% on the month in October, well below forecasts. The year-on-year figure for CPIF-inflation was as low as 0.6%, a full 0.4% point below the Riksbank’s view. Inflation has now been surprisingly low for several months in a row.
There is little doubt that the pressure on the Riksbank to cut rates increases. However, there are several important key figures out ahead of the Riksbank’s December meeting, such as Q3 GDP and two unemployment readings. We expect these figures to be more in line with the Riksbank’s view. Also, CPI for November will be out ahead of the next Riksbank meeting. Still, the rising housing prices and signs of rising credit growth work in the other direction. For now, we stick to our forecast that the Riksbank will stay on hold for long, although today’s figures clearly increased the likelihood for a near-term rate cut.
The main surprise was prices for food that fell more than forecast and shaved off 0.12% point of the CPI (compared to our forecast at -0.04%). Moreover, prices for foreign travelling didn’t rise as much as forecast. Fuel prices and electricity prices were cut, while prices for clothing and footwear were raised, in line with our forecast.
Details, October
CPI m/m: -0.21% (Nordea 0.02; consensus 0.1; prior 0.4)
CPI y/y: -0.1% (Nordea 0.2; consensus 0.2; Riksbank 0.3; prior 0.1)
CPIF m/m: -0.2% (Nordea 0.0; consensus 0.1; prior 0.4)
CPIF y/y: 0.6% (Nordea 0.8; consensus 0.9; Riksbank 1.0; prior 0.9)
CPI: 314.40 (Nordea 315.11, prior 315.05)
Nordea