Sweden’s core inflation drops to 2.2% in July

Sweden’s core inflation rate fell to 2.2 per cent in July, slightly higher than economists’ 2.1 per cent forecast but down from 2.3 per cent in June, according to Bloomberg citing Statistics Sweden.

This data comes ahead of Riksbank’s anticipated policy announcement on August 20, where a quarter-point cut in the benchmark rate to 3.5 per cent is widely expected.

Despite the lower inflation reading, which indicates a more gradual easing of price pressures, markets and analysts largely maintain expectations for the Riksbank to proceed with its planned rate cut.

The central bank has indicated it plans to reduce borrowing costs by two or three more quarter points by year-end, though some pressure is mounting for more aggressive action due to weak domestic demand and ongoing low inflation.

Svenska Handelsbanken’s chief strategist, Claes Mahlen, and head of forecasting, Johan Lof, both stated that the latest inflation figures are unlikely to alter the central bank’s approach.

Analysts at Swedbank suggest the Riksbank might even consider more frequent rate cuts if the labour market weakens further and economic conditions do not improve as hoped.

Attribution: Bloomberg

Subediting: M. S. Salama