Sweden’s Inflation Surge Dims August Rate Cut Prospects

Sweden's inflation rate unexpectedly jumped to 2.9% in June, surpassing both May's 2.3% CPIF reading and analyst forecasts of 2.4%-2.5%. The surprise uptick casts doubt on the Riksbank's anticipated August rate cut, with traders now pricing in just 7 basis points of easing versus 8 basis points previously.

Governor Erik Thedéen faces a delicate balancing act when policymakers convene on August 19. June's 25-basis-point reduction was meant to stimulate growth, but persistent inflation above the 2% target complicates further easing. Market expectations have shifted toward a potential 17-basis-point cut in September instead.

The inflationary spike drew sharp reactions from analysts. Svenska Handelsbanken's Johan Lof called it a "major upside surprise" that introduces fresh uncertainty, while SEB's Johan Javeus warned the data significantly reduces near-term easing odds. Financial markets now appear to be recalibrating expectations for Sweden's monetary policy trajectory.