Nordea calls Swedish rate cut

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Sweden’s Riksbank is expected to cut its key lending rate by 0.20% when it meets later in October, according to an outlook from Nordea in the wake of new data showing Swedish CPI significantly undershot consensus expectations for September.

The latest year on year CPI rate was actually reported as deflation of -0.4% in September, which was significantly lower than the consensus of -0.1% and the Riksbank’s own forecast of a 0% change.

Calculated on a month on month basis, CPI rose by just 0.16% compared with the previous month, which was significantly less than Nordea’s own forecast of 0.53%, and the consensus of 0.5%.

“As a consequence of the very low September reading, we change our view on the Riksbank and now expect a rate cut at the monetary policy meeting due 27 October (announcement 28 October). We believe the repo rate will be cut by 20bp to 0.05% (in line with the ECB:s refi rate),” the Nordic bank wrote.

The news comes on the same day as the UK reported its inflation rate fell significantly in September.

There, the CPI rate fell to 1.2% from 1.5% the previous month, indicating the lowest rate of annualised inflation since September 2009, when the rate was 1.1%.

Falling energy and food prices were key factors in depressing the rate of inflation, which is now well off the 2% target set for the Bank of England.

Previously, Eurostat reported on 30 September that eurozone inflation was running at 0.3% on an annualised basis, down from 0.4% the previous month.

It also identified energy as a key driver of deflationary pressures, with annualised enregy costs across the single currency region down -2.4% on an annualised basis in September.




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