Sweden's central bank will most likely disappoint

The Swedish inflation rate according to CPIF (Consumer Price Index with fixed interest rate) was 1.1% in September, which is a decrease from August when it was 1.2%. The information is in line with SBC's preliminary inflation figures that came a week ago. According to price statistician Filip Hellberg at the Central Bureau of Statistics (SCB), the reason why inflation fell in September is that fuel prices have fallen. It is also in line with the average forecast among analysts, according to Bloomberg's compilation.

The fact that CPIF was again lower than Sweden's central bank AKA Riksbanken's target of a CPIF inflation of 2.0% increases the pressure on Riksbanken to lower the policy rate by 50 basis points on November 7, 2024.

Central Bank Governor Erik Thedeén confirms that the quote "Inflation has come down and shows signs of stabilizing. Inflation forecasts has stood up quite well over the past six months." unquote. At the same time, Erik Thedeén repeats that right now there is a lot of focus on CPIF where energy prices are excluded as they move a lot and are assumed to be shaky going forward. Energy prices have fallen by almost 30% in the past year and CPIF are very sensitive to energy prices, continues Erik Thedeén.

Erik Thedeén also emphasizes that there is no mechanical formula for Riksbanken to use when deciding on changes in the policy rate, it is an overall assessment. The Governor of Riksbanken concludes by saying that the forecasts for the policy rate, the so-called interest rate path, are not a promise. Quote “There is still considerable uncertainty. Among other things, geopolitical developments can affect inflation and make further cuts unreasonable." unquote.

Personally, I think that Erik Thedeén and his colleagues have already decided that they will not lower the Swedish policy rate by 50 points and that the warning about a geopolitical development and the exchange rate of the krona is only a way of trying to excuse themselves.