Swedish inflation drops to 0.2% in July

Sweden's inflation rate dropped significantly in July, reaching 0.2 percent based on preliminary figures from Statistics Sweden (SCB). This marks a decrease from the 0.7 percent recorded in June. The monthly change from June to July was a negative 0.3 percent.

Susanne Spector, chief economist at Danske Bank, noted that inflation remains low, which boosts household purchasing power. However, she also pointed out that prices for goods were higher than anticipated, possibly reflecting supply chain disruptions and high energy costs from earlier in the year. For the KPIF measure, which excludes mortgage interest effects, inflation stood at 0.7 percent in July.

The Swedish central bank, Riksbank, aims for an annual KPIF inflation rate of 2 percent. Mikael Nordin, a price statistician at SCB, stated that government tax reductions, implemented to mitigate the impact of conflicts in the Middle East, have influenced the latest figures. "Energy prices fell sharply in July, contributing to the lower inflation rate according to KPI and KPIF," he noted.

Spector agreed that tax changes, including a reduced VAT on food and lower fuel prices, are key drivers of the sustained low inflation. "Despite inflation coming in higher than expected, it remains at a low level, largely driven by tax changes that lowered food VAT and lower fuel prices, meaning households gain increased purchasing power," she said. She also observed that inflation has exceeded the Riksbank's forecasts for two consecutive months, with energy prices showing a greater impact. Danske Bank expects the Riksbank to raise interest rates in the fall, possibly in September, though the timing remains uncertain. The market currently assesses a 50/50 probability for a rate hike at the August 20 meeting.

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Inflation ligger fortfarande på en låg nivå, vilket innebär att hushållen får en ökad köpkraft.