Sweden’s inflation rate hit a new three-decade high in August, boosting the odds that the Riksbank will accelerate its efforts to curb soaring prices.
(Bloomberg) — Sweden’s inflation rate hit a new three-decade high in August, boosting the odds that the Riksbank will accelerate its efforts to curb soaring prices.
The central bank’s target measure, CPIF, rose 9% from a year earlier in August, according to a statement published by Statistics Sweden on Wednesday. Economists surveyed by Bloomberg expected prices to rise by 8.8%, while the central bank’s projection from June was 7.5%.
The reading adds to pressure on the Riksbank to act forcefully, after peers such as the European Central Bank have stepped up the pace of rate increases. Swedish policy makers are expected to double their key policy rate to 1.5% on Tuesday, but market pricing indicates that an even bigger hike could be on the cards. Some economists have flouted the idea that the bank may take the policy rate a full percentage point higher.
Swedbank analysts Knut Hallberg and Carl Nilsson said price increases on clothing, package travels as well as food were lower than they had expected. While a 75 basis-point rate increase on Tuesday remains their main scenario, the risks of a smaller and a larger hike than that are now evenly matched, they said.
What Bloomberg Economics Says…
“A 75-basis-point hike was already virtually a done deal. Wednesday’s data — showing CPIF inflation at more than four times its target — could prompt an even larger increase.”
— Selva Bahar Baziki, economist
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The uptick was still broad-based as a gauge that strips out energy stood at 6.8%. Prices on food and non-alcoholic drinks have increased every month since December 2021, Statistics Sweden said, with the largest price increases in the last 12 months recorded for cabbage, margarine and coffee.
Ahead of next week’s decision, the Riksbank will also study the outcome of an inflation-expectations survey due on Thursday. Even with inflation at record levels, long-term expectations have remained relatively close to its 2% target, and if that should change it would increase the central bank’s urgency.
(Updates with analysts’ comments, chart)
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