Danske Research Team expects the the central bank of Sweden, Riksbank to keep its policy rate unchanged at 1.75% but adopt a more hawkish tone, acknowledging upside inflation risks. They note that a sharp downside surprise in Swedish inflation, driven by services and energy, may still influence policy, yet guidance is seen turning slightly more hawkish versus the March meeting.

Rate hold but communication to firm up

"In Sweden, April's flash inflation data revealed a sharper-than-expected decline, with core inflation at 0% and CPIF at 0.8% y/y, below forecasts."

"The downside surprise stemmed from lower services inflation and energy prices alongside a noticeable pass-through of VAT reductions to food prices (-5.5% m/m) fell short of forecasts, indicating potential deflationary pressures. "

"This data may influence the Riksbank's monetary policy stance, as inflation trends diverge from expectations."

"We expect the Riksbank to stay on hold at 1.75% but communicate a slightly more hawkish message compared to the March MPR, despite yesterday's low inflation print."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)