Low inflation paves way for new cut

Sweden’s CPI inflation reading for April was a negative 0.2% – down from +0.2% in March – while underlying inflation fell from 0.9% to 0.7%. Cheaper holidays, lower interest rates and falling electricity prices contributed to the downturn.

The Riksbank has low tolerance of negative surprises and it is feasible the central bank will cut its benchmark rate further in the coming weeks, particularly if the Swedish krona strengthens against the euro.