Empty barrels scrape the most

On 14 August 2024, The Central Bureau of Statistics (SCB) will publish Sweden's inflation rates for July. Chief strategists and economists from the major commercial banks in Sweden expect CPIF, the measure used by Sweden's central bank AKA Riksbanken where interest rate effects are excluded, to have increased compared to June 2024, albeit marginally. Experts' expectations are in the range of 1.5%-1.6% compared to the inflation rate of 1.3% for June.

An explanation why CPIF may rise compared to June may be due to fluctuations in energy prices. Electricity prices fell in July this year, but significantly less than a year ago. There are also indications that food prices have risen less than expected. These factors combined may cause inflation to end up lower than expected, personally I think CPIF will be 1.7%.

However, I believe that the CPI, which includes interest costs, may have declined compared to the June 2024 inflation rate of 2.6%. I base this on Riksbanken's lowering of the policy rate in May this year in connection with lower fuel prices now in July compared to July last year.

At the last monetary policy meeting, Riksbanken made vague promises that they may make another 3 reductions in the policy rate in 2024. But before it's written in stone, it's just empty promises with no meaning. None of the major commercial banks believe in a double reduction, i.e. 50 basis points at the upcoming monetary policy meeting on August 20, 2024.

If inflation falls below Riksbanken's inflation target of 2% per year measured by CPIF, the pressure from outside on Riksbanken for a double reduction will be enormous.