Swedish Core Inflation on Target as the Riksbank Plots Next Move

Sweden’s core inflation rate fell to the Riksbank’s 2% target for the first time since 2021 as the central bank is weighing its next easing move to spur domestic demand.

(Bloomberg) — Sweden’s core inflation rate fell to the Riksbank’s 2% target for the first time since 2021 as the central bank is weighing its next easing move to spur domestic demand. 

A measure of annual price increases that strips out energy declined to 2% last month, according to a flash estimate published Tuesday by Statistics Sweden. That’s just above the 1.9% that the Riksbank as well as economists surveyed by Bloomberg had expected. 

The reading comes as investors and analysts are trying to figure out whether the Swedish central bank will step up its pace of easing by taking borrowing costs half a percentage point lower in one go, or continue with quarter-point cuts through the end of this year. 

After their meeting last month, officials said that they expect to lower the key rate twice more this year, to 2.75% from 3.25%. However, a bigger move could also be appropriate at one of the two meetings left on the 2024 calendar, they said.

Even though the Riksbank started lowering its benchmark before most peers in May this year, the Swedish economy has yet to recuperate from almost three years of stagnation, and that has increased pressure on the central bank to move quicker. 

Tuesday’s release marks the first time that Statistics Sweden publishes a flash estimate of inflation, without details on which product groups contributed to price increases. Doing so aligns more closely with price-data releases by peers, such as the euro area.

The agency has said that on average, the early reading should only deviate from final numbers by an average of a hundredth of a percentage point.

Figures published in the database of Statistics Sweden showed that the annual CPIF inflation rate that the Riksbank targets was at 1.15% in September, marking its fourth consecutive month below 2%.