Sweden’s core inflation in May slightly exceeded expectations but remains low, and the central bank is expected to keep interest rates unchanged.

(1) Sweden’s core inflation rate in May rose slightly higher than analysts expected, which may help ease policymakers’ concerns about the potential consequences of the Iran conflict. Preliminary data from Sweden’s statistics bureau showed that excluding energy, the inflation rate rose to 0.5% in May, compared to 0% in the previous month, which was close to a three-decade low. The analysts’ median forecast was 0.3%, while the Swedish central bank predicted 0.9% in March. (2) European central bank governors are closely monitoring whether energy price increases due to the Middle East war are broadly pushing costs higher. Meanwhile, Sweden's inflation rate has declined in recent months as food and fuel tax cuts have helped households cope with soaring prices. (3) The Swedish central bank stated it expects to keep interest rates unchanged at 1.75% in the short term, waiting for more data. The bank also indicated that the risk of persistent upward price pressures remains.