Swedish Inflation Trails Forecasts to Buffer Dovish Riksbank
(Bloomberg) -- Swedish inflation accelerated less than expected in September, reinforcing the central bank’s argument for treading cautiously on the road to removing monetary stimulus.
The Riksbank’s target measure, CPIF, increased to 2.8% last month from 2.4% in August, Statistics Sweden said Thursday. While that is the highest annual rate in 13 years, the reading was still lower than the 3% median forecast in a Bloomberg survey of economists. The Riksbank, which expects price increases to peak next month, also expected inflation just above 3% in September.
The lower-than-expected reading in September was mainly explained by prices of food, non-alcoholic beverages and apparel, Swedbank economists said in a note. Sweden’s central bank, which has been among the most dovish in the G-10 group of nations with the most traded currencies, may still see its tolerance for inflation above target tested in the months ahead.
“The downtick in food was broad and we see a potential for a recovery ahead, as energy and commodity prices remain high,” Swedbank’s Cathrine Danin and Carl Nilsson said. “Taken together, CPIF will likely be elevated for more months to come.”
While the central bank has indicated that it won’t react to what it views as temporary effects of an energy price surge, any signs that inflation pressure is picking up more broadly may hasten its plans to move away from its expansionary monetary policy.
In September, CPIF excluding energy prices grew by 1.5% on an annual basis, slightly less than expected but up from 1.4% in the previous month.
The central bank has welcomed an upturn in inflation after years of struggling to get price increases up to its 2% target, and still expects to hold its benchmark rate at zero all the way through the third quarter of 2024. Even as it has started scaling back large-scale asset purchases implemented during the pandemic, the Riksbank plans to keep its balance sheet largely unchanged through 2022 by compensating for bond redemptions.
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