January inflation with upside risk.
Potentially some more bond supply.
End of mandate for FX intervention could point to an end to QE purchases as well - we reiterate our call for 3Y-10Y steepeners.
? Removal of FX mandate (marginally) SEK-positive.
January inflation with upside risk
January inflation is surely the event of the week in Swedish FI and FX markets. January is the most volatile month of the year for prices as Christmas sales kick in. In addition, there is the reweighting of all components – it is a gamble how that turns out. Finally, many public institutions change price lists at the beginning of the year, such as public transportation, dental care, post/package charges and in some cases municipalities raise grid fees. We have assumed a fairly high price increase on food as the food industry last autumn signalled the need for compensating price increases on the back of higher input costs due to last summer’s drought. We also note that the outcome in Denmark was even higher, possibly suggesting an upside risk. One of the more volatile components is of course clothing. Here we have assumed a quite normal price drop of some 11.5 % m/m, but there too the Danish outcome needs to be considered: it showed a much smaller drop than normal.
The impact on mortgage rates from Riksbank’s December hike appears to be quite muted. There are increases in car fuel and electricity due to higher taxes, too. The downside is mainly represented by transportation (lower international airline ticket prices) and recreation (both lower charter package prices and sales on electrical goods).
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