Swedish inflation falls to 0.7 percent, but tax cuts are carrying the decline

CPIF inflation fell to 0.7 percent in July according to preliminary figures from Statistics Sweden, down from 1.3 percent in June and in line with analyst expectations; CPI fell to 0.2 percent. SCB price statistician Mikael Nordin points to sharply falling energy prices, while the temporary fuel tax cut and the state subsidy for monthly public transport passes introduced on July 1 also pull the figure down. Danske Bank chief economist Susanne Spector says inflationary pressure is low and highly dependent on government tax policy, and that without it inflation would sit closer to the 2 percent target. She therefore sees no reason for the Riksbank to cut rates.

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