European Economic Perspectives：Sweden，Core inflation down， Riksbank to cut next week

Investment Rating - The report maintains a positive outlook on the Swedish economy, expecting the Riksbank to cut rates by 25 basis points to 3.5% next week, with further cuts anticipated in September and December [2][4][8]. Core Insights - Headline inflation in July rose to 1.7% year-on-year, driven by electricity prices, while core inflation decreased to 2.2% year-on-year [2][5]. - The Riksbank is expected to guide for two additional rate cuts this year, reflecting a dovish shift in its monetary policy stance [4][7]. - The report forecasts CPIF inflation to remain below the target for the rest of the year, with annual forecasts of 2.0% for 2024 and 1.9% for 2025 [3][8]. Summary by Sections Economic Overview - July headline inflation increased to 1.7% year-on-year from 1.3% in June, while core inflation fell to 2.2% from 2.3% [2][5]. - The Riksbank's rate cut is supported by a downward trend in core inflation and a contraction in GDP of -0.8% quarter-on-quarter in Q2 [4][6]. Inflation Analysis - Core goods inflation turned negative at -0.4% year-on-year, while food prices and services inflation remained stable at 1.8% and 3.2% year-on-year, respectively [3][5]. - The report anticipates CPIF inflation to stay below the target for the remainder of the year, with fluctuations expected in CPIF ex energy between 2.1% and 2.7% [3][8]. Riksbank Policy Outlook - The Riksbank is expected to cut rates by 25 basis points in August, followed by another cut in September, bringing the policy rate to 3.0% by the end of 2024 [8]. - The report suggests that the Riksbank will not publish new forecasts at its upcoming meeting but will likely provide more explicit guidance on the rate path [7][8].