Sweden's August inflation slows uncertain rate hike policy

[Stockholm 10th Reuters]-Sweden's August inflation slowed. Uncertainty about the central bank's rate hike plans around the end of the year, and the currency krona fell against the euro.

The August CPIF (consumer price index excluding the impact of mortgage loans) announced by the Swedish statistical office was down 0.4% from the previous month and up 1.3% from the previous year. In July, it was up 0.4% from the previous month and up 1.5% from the previous year.

The central bank's forecast and the market forecast compiled by Reuters were up 1.5% from the previous year. The central bank target is 2%.

August CPI fell 0.4% month-on-month and increased 1.4% year-on-year. In July, it rose 0.4% from the previous month and 1.7% from the previous year.

The economy, which has been growing for several years, has begun to slow, and the US-China trade war and the UK's withdrawal from the European Union have made the future uncertain.

Many analysts say that the growth and inflation expectations of the Swedish central bank are too optimistic. The central bank has shown a policy to raise interest rates at the end of the year or early next year, but the financial market incorporates the possibility of rate cuts until mid-2020.

SEB pointed out, “Inflation generally below expectations should be seen as a major blow to the central bank. This result has increased the possibility that the central bank will not be able to maintain a rate hike bias in October.”

The central bank left the policy rate at minus 0.25% on the 5th of this month.

The next meeting will be on October 24th.