SWEDEN: Food and Goods Drive Downside Surprise, Jansson Likely To Support Cut

Looking at the details of the flash report – newly released as of February – goods and food were the primary downside driver of the soft CPIF ex-energy reading. It seems likely that Riksbank Deputy Governor Jansson will vote for a cut at the March decision, but we are less sure on the other members. We still think some activity weakness is likely needed for Thedeen/Seim to support another cut, for example. The recent developments in energy markets (and the impact it could have on inflation expectations) may provide another argument to hold steady on March 19. That said, the uncertainty shock stemming from the conflict could also be portrayed as a dovish development if the Riksbank becomes concerned about the household consumption outlook. The reaction in SEK FX to the inflation report has been fairly contained for now, with EURSEK still hovering just below 10.70.

• Services excluding the capital stock ticked up to 2.1% Y/Y (vs 1.9% prior). A reminder that services was the main driver of the soft January reading.
  • "Insurance and financial services" was 3.5% Y/Y (vs 3.3% prior), while "restaurants and accommodation" rose to 3.7% Y/Y (vs 3.0% prior).
• Capital stock unchanged at 3.8% Y/Y
• Food, alcohol and tobacco the main downside driver at 2.0% Y/Y (vs 3.1% prior).
• Energy rises to 6.3% Y/Y (vs 5.9% prior).
• Goods excluding food, alcohol and tobacco slips further into deflationary territory to -1.3% Y/Y (vs -0.7% prior).
  • "Clothing and footwear" -0.3% Y/Y (vs 0.4% prior).
  • "Furnishings and household equipments" -3.2% Y/Y (vs -2.7% prior).
• See table below for full COICOP breakdown (via Stats Sweden)