Sweden’s core inflation slows somewhat less than forecast
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SWEDEN’S underlying inflation rate fell less than expected in December, highlighting uncertainty around how long it will take before the country’s central bank can declare victory in its battle against price increases.
A measure that strips out energy costs and the effect of interest-rate changes rose 5.3 per cent from a year ago in December, according to a release from Statistics Sweden on Monday (Jan 15). While that marks a marginal retreat from November, prices increased slightly more than projected by economists, who had pencilled in a 5.2 per cent rise in a survey by Bloomberg.
Riksbank officials have in recent weeks signalled that they have closed the door to additional interest-rate hikes, after inflation readings for October and November showed a firm downward trend. While they have stopped short of discussing rate cuts, economists expect the central bank to start easing policy this spring or summer.
That would help lift the burden on households that have been squeezed by increasing borrowing costs and prices since early 2022. As household spending weakens and new home construction has come to a near halt, most forecasters expect Sweden to record an economic contraction for 2023 as well as 2024.
A more benign inflation development would also give more leeway to the Swedish government, which has shunned stimulus measures for fear of fuelling price increases.
In December, the CPIF measure that the Riksbank targets fell to 2.3 per cent on an annual basis, the lowest since July 2021. The drop was mainly explained by far lower electricity prices than in December 2022, when a spike in power prices pushed inflation to double digits.
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The Riksbank’s forecasts from November imply that CPIF will fall below 2 per cent by mid-year, and that the underlying measure will trend lower to end 2024 at 2.1 per cent. BLOOMBERG
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