Swedish inflation is rising, but a September rate hike would take a major surprise

Swedish inflation is moving higher, but economists expect a large surprise in the new figures before the Riksbank raises interest rates at its September meeting.

Statistics Sweden will release the August inflation figures on Monday. Forecasts put CPIF inflation, the Riksbank's preferred measure, at about 1%, higher than in July but still at a low level.

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Then it would take a major surprise

Swedbank chief economist Mattias Persson said inflation would need to come in “much higher” than expected to justify a September increase. Temporary fiscal measures, including food VAT and petrol-tax changes, are currently pushing the headline figure down, he said, while inflation excluding those policies is considerably higher.

Price pressures are building across several areas. Nordea expects food prices to have risen slightly in August, while clothing and footwear likely increased clearly on seasonal trends. Electricity and fuel prices are also rising. At the same time, the Swedish economy has gathered more momentum.

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It is considerably higher if you exclude policy

Persson sees underlying inflation reaching 2.6% to 2.7% toward late winter or spring next year, above the Riksbank's 2% target. Most forecasters now expect one or two rate increases, with the first coming later in the autumn.

Danske Bank economists previously expected a September hike but now forecast one in November. Chief economist Susanne Spector said the change reflected their view that Monday's data would not surprise enough to justify such a major shift, given the Riksbank's communication at its August meeting. She added that a September move was not impossible if the figures produced major surprises.

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It is not impossible