Sweden's inflation continues to fall – but that's not the whole story
Inflation continues to fall in Sweden, albeit not quite as fast as expected. So what happens now?
Sweden’s year-on-year inflation rate fell to 9.7 percent in May, according to the consumer price index measurement (CPI), down from 10.5 percent in April.
According to Bloomberg, that’s slightly less than most forecasts, which had predicted that it would drop to 9.5 percent.
Inflation according to the CPIF measurement, which removes rising interest rates on mortgages from the equation, stood at 6.7 percent in May, down from 7.6 percent in April. This was in line with predictions, reports Bloomberg.
Inflation according to CPIF is the measurement used by Sweden’s Central Bank, the Riksbank, which is aiming to get it down to its two percent target.
“A continued decrease in electricity and food prices contributed to the lower inflation rate in May,” said Statistics Sweden analyst Mikael Nordin.
Food prices went down 0.4 percent in May and electricity prices fell 11.1 percent. This is unsurprising, as more fruit and vegetables are now in season in Sweden, and people use less electricity during the long and warm summer days.
But concerningly, experts pointed out, a lot of other categories, such as hotels and restaurants, saw price increases.
Sweden's underlying inflation still remains high, they warned.
"It's a disappointment," Nordea's chief analyst Torbjörn Isaksson told the TT newswire about the higher-than-expected inflation in May.
The inflation rate will affect whether or not the Riksbank decides to increase the interest rate.
It raised the rate to 3.5 percent at the end of April, the highest since 2008, to combat rising inflation.
Most analysts predict that since inflation didn’t fall as much as expected in May, the bank will hike the rate by 0.25 percentage points at its meeting in June.
Swedbank's chief economist Mattias Persson said the Riksbank might possibly raise the interest rate at its next meeting in September, too.
"It's still the case that underlying inflation has taken both us, the Riksbank and the market by surprise. It's stronger and more persistent than we thought," he told TT.
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Sweden’s year-on-year inflation rate fell to 9.7 percent in May, according to the consumer price index measurement (CPI), down from 10.5 percent in April.
According to Bloomberg, that’s slightly less than most forecasts, which had predicted that it would drop to 9.5 percent.
Inflation according to the CPIF measurement, which removes rising interest rates on mortgages from the equation, stood at 6.7 percent in May, down from 7.6 percent in April. This was in line with predictions, reports Bloomberg.
Inflation according to CPIF is the measurement used by Sweden’s Central Bank, the Riksbank, which is aiming to get it down to its two percent target.
“A continued decrease in electricity and food prices contributed to the lower inflation rate in May,” said Statistics Sweden analyst Mikael Nordin.
Food prices went down 0.4 percent in May and electricity prices fell 11.1 percent. This is unsurprising, as more fruit and vegetables are now in season in Sweden, and people use less electricity during the long and warm summer days.
But concerningly, experts pointed out, a lot of other categories, such as hotels and restaurants, saw price increases.
Sweden's underlying inflation still remains high, they warned.
"It's a disappointment," Nordea's chief analyst Torbjörn Isaksson told the TT newswire about the higher-than-expected inflation in May.
The inflation rate will affect whether or not the Riksbank decides to increase the interest rate.
It raised the rate to 3.5 percent at the end of April, the highest since 2008, to combat rising inflation.
Most analysts predict that since inflation didn’t fall as much as expected in May, the bank will hike the rate by 0.25 percentage points at its meeting in June.
Swedbank's chief economist Mattias Persson said the Riksbank might possibly raise the interest rate at its next meeting in September, too.
"It's still the case that underlying inflation has taken both us, the Riksbank and the market by surprise. It's stronger and more persistent than we thought," he told TT.
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