Sweden’s core inflation rose unexpectedly in July, but fiscal measures mask underlying price pressures, keeping rate cuts on hold.
Sweden’s CPIF ex-energy inflation climbed to 0.6% year-on-year in July, exceeding forecasts of 0.3% and the Riksbank’s 0.2% estimate. Headline CPIF inflation slowed to 0.7% from 1.3%, driven by government fuel duty cuts and public transport subsidies.
The Riksbank estimated the transport discount would reduce inflation by just over 0.1 percentage point in the second half of 2024. Despite the fiscal drag, core inflation momentum matched pre-pandemic averages, with a 0.4% month-on-month rise in CPIF ex-energy.
Nomura strategists expect the Riksbank to maintain its policy rate through 2026, citing persistent underlying inflation even after adjusting for temporary fiscal measures.