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Sweden Consumer Prices (Apr.)

The stronger-than-expected increase in Swedish inflation in April was partly due to high energy and food prices but also because of broadening price pressures. We expect the core rate to remain above the Riksbank’s target for some time, which will prompt it to continue hiking interest rates.
Michael Tran Assistant Economist
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Norway faces its own energy crisis

While Norway is not directly in the firing line from the reduction in Russia’s gas exports, it has now got its own problems with low water levels in its hydro reservoirs. This may add a bit to Norway’s electricity inflation and restrict Norway’s electricity exports to continental Europe. That said we don’t think it will stop the Norges Bank from raising interest rates by 50bp at next week’s policy meeting. Drop-In: Europe under siege – The economic impact of Russia’s gas threat Thursday, 18th August 10:00 ET/15:00 BST. Register now.

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Sweden Consumer Prices (Jul.)

The decline in CPIF inflation in July will be of limited comfort to policymakers given that the core rate, excluding energy, jumped to 6.6%. We still think the Riksbank may raise its repo rate by a further 50bp before its next scheduled meeting, on 20th September, and will lift it to 2.0% by year-end.

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Nordic & Swiss Central Bank Watch

Norges Bank has further to go

The Norges Bank said in June that it was likely to raise its policy rate by 25bp at its meeting next week, but we now think it is more likely to go for a 50bp hike. Whatever it decides on interest rates, we expect it to signal strongly that further hikes will be needed in the coming months.

11 August 2022

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European Data Response

Euro-zone Retail Sales (Mar.) & Final PMIs (Apr.)

The decrease in euro-zone retail sales in March is the first indication from official data that the war in Ukraine is weighing on consumption. With the final PMI surveys pointing to price pressures intensifying and firms remaining pessimistic, we think 2022 will be a year of stagflation for the euro-zone.

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European Data Response

Euro-zone Consumer Confidence (Apr.)

The rise in consumer confidence in April was slightly better than expected. Nevertheless, confidence is still very low and points to household spending falling in April. That’s consistent with our assumption that the euro-zone economy will contract in Q2 as consumption declines.

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Nordic & Swiss Data Response

Sweden Consumer Prices (Mar.)

The stronger-than-expected increase in Swedish inflation in March is likely to give more ammunition to the hawks in the Riksbank, and lends support to our view that the Bank will start to raise the repo rate and press ahead with “QT” this year.

14 April 2022
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