January inflation proved unspectacular, close to market and Riksbank expectations.

Clothing prices dropped 10.9% m/m, much as expected. This is always the main contributor to January inflation swings.

Airline tickets dropped less than forecast (a risk we noticed) while recreation prices (including charter packages) fell much as expected.

Re-weighting of the CPI-basket this year actually had no significant impact according to Statistics Sweden. A new method of calculating mortgage cost was introduced which did not have any major impact on that component. However, we saw however a huge impact on the calculation of mortgage rates, a subject into which we will need to dig deeper to see whether it will have any implications going forward.

An interesting aspect is that January data support the notion that there is a dichotomy in Swedish inflation: domestic/services prices are accelerating while import/goods prices are still decelerating, despite the krona depreciation.

Compared to Riksbank forecasts, we now see both CPI and CPIF on higher trajectories, at least short-term (charts below). In particular, petrol prices have risen sharply in the past weeks, giving a marked lift to February inflation. That said, we need to make a more major overhaul of the forecast before concluding that the probability for inflation outcomes has shifted to the upside of Riksbank’s forecasts.

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