Nordea’s Torbjörn Isaksson notes that Swedish January CPIF and CPIF ex energy matched flash estimates, but services inflation surprised on the downside. Core services prices fell more than expected, raising concerns for the Riksbank. Nordea sees the details as dovish and is likely to lower its inflation path, while still expecting the Riksbank to hold 1.75%, with a rate cut now clearly possible.

Dovish details and policy implications

"The main surprise on the downside was prices for services. Core services inflation (ex foreign travel and administrative set prices) declined and was lower than we had expected. Car rental plunged and prices for hotel accommodation fell too, which is seasonal."

"However, the low services inflation is probably concerning for the Riksbank. Prices for goods fell, but less than expected."

"All in all, our instant view is that the details are “dovish”. We will look through all details and update our inflation forecast in the coming days, but we will most likely lower the inflation path."

"Our call on CPIF ex energy was below the Riksbank’s view already before the January reading. The upturn in the economy is strong, though, which is an important."

"For now we keep our view that the Riksbank will stay on hold at 1.75%, but a rate cut is indeed possible."

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