Swedish Inflation at 28-Year High Tests Riksbank’s Patience
(Bloomberg) -- Swedish inflation accelerated more than expected in November to the highest level in almost 28 years, testing the central bank’s patience for a price surge it believes to be largely transitory.
The Riksbank’s target measure, CPIF, stood at 3.6% last month, Statistics Sweden said Tuesday. It is the highest since December 1993, just over a year before the inflation target was formally introduced.
The Riksbank had expected CPIF inflation at 3.2%. The reading was also slightly higher than the median forecast in a Bloomberg survey of economists.
“The debate on how long a “transitory” period is has started in Sweden as well, putting pressure on the Riksbank to take action,” said Torbjorn Isaksson, an economist at Nordea Bank. “This supports our view that the Riksbank will reduce their balance sheet during 2022.” The economist added that the central bank will probably raise its rate path “in the coming reports.”
The central bank, among the most dovish in the rich world, still believes that the surge in inflation will prove to be temporary, as the rate of price hikes is expected to subside after remaining above its 2% target in the first half of next year.
Accordingly, it has flagged that monetary policy will remain unchanged through 2022 unless the inflation surge turns out to be more long-lasting. Under current plans, the Riksbank expects to keep its key policy rate at zero some time into 2024.
As in previous months, electricity and fuel was a large factor behind annual inflation, as unfavorable weather conditions drove electricity prices to new record levels and the cost of fuel has increased for 12 consecutive months.
Prices also rose on package holidays, food, restaurant and hotel services as well as on miscellaneous goods and services, Statistics Sweden said in a statement. Excluding energy prices, CPIF grew by 1.9% on an annual basis in November, up from 1.8% in the previous month and in line with the Riksbank’s expectations.
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