Swedish Inflation at 10-Year High Ignites Bets for Riksbank Hike

(Bloomberg) -- Swedish inflation beat economists’ forecasts in September, boosting the case for the central bank to increase interest rates as soon as December, analysts said.

Consumer prices with a constant interest rate rose an annual 2.5 percent in September, up from their August level of 2.2 percent, according to data published by Statistics Sweden on Thursday. Analysts surveyed by Bloomberg had estimated a rate of 2.3 percent while the Riksbank had forecast 2.4 percent. Prices rose 0.5 percent in the month. CPIF excluding energy, a measure closely watched for underlying price pressures, rose an annual 1.6 percent, in line with the Riksbank’s forecast.

The krona rallied on the news, rising as much as 1.4 percent versus the euro.

Swedish Inflation at 10-Year High Ignites Bets for Riksbank Hike

With the key inflation measure now holding above the 2 percent target since May, policy makers at the central bank said in September they were aiming to start raising rates in December or February.

According to Nordea Bank Abp analyst Andreas Wallstrom, Thursday’s data “supports our call of a rate hike in December 2018.”

‘Clearly Above’

That view was shared by Swedbank AB’s Anna Breman: “CPIF is clearly above target and CPIF ex-energy is trending up, therefore both criteria that the Riksbank has to hike rates is fulfilled.”

Svenska Handelsbanken AB’s Claes Mahlen described the data as “great news for the Riksbank.”

Policy makers are eager to unwind some of the stimulus unleashed over the past years, which has included cutting rates deep below zero and buying up about half of the government bond market. The central bank’s last rate increase was in July 2011.

Speaking to reporters in Stockholm, Deputy Governor Cecilia Skingsley described the data as “one more piece of the puzzle" ahead of the Riksbank’s monetary policy meeting on October 23.

“We have now had a long period where we have fulfilled the target and we have inflation expectations that are anchored, so if the economy continues as we have forecast, there is scope for a gradually reduced monetary-policy expansion," Skingsley said.

(A previous version of this story corrected the month of the last rate hike)

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