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(Bloomberg) — Sweden’s core inflation rate increased at a slower pace than the central bank had expected in May, giving it room to hold off on borrowing-cost increases in the wake of the Iran war.
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The CPIF inflation rate excluding energy rose to 0.5% in May, from an almost-three-decade-low of 0% the previous month, according to a preliminary release from Statistics Sweden on Thursday. The median forecast in a Bloomberg survey of analysts was 0.3%, while the Riksbank’s projection from March was 0.9%.
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Central bankers across Europe are watching for signs that higher energy prices caused by the war in the Middle East are lifting costs in their economies more broadly. At the same time, inflation in Sweden has fallen away over recent months with cuts to taxes on food and fuel helping to shield households from price spikes.
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The Riksbank has said it expects to leave interest rates unchanged at 1.75% in the short term while it awaits more data about the outlook. It has also flagged that it sees a continuing risk of higher price pressure ahead.
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The headline inflation rate, CPIF, rose to 1.5% in May from 0.8% the previous month, close to the Riksbank’s March forecast of 1.6%.
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“CPIF excluding energy is still well below the Riksbank’s forecast and the May reading doesn’t alter the picture of overall inflationary pressures being low currently,” Nordea Bank Abp analyst Torbjorn Isaksson said in a note.
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“The ECB will probably hike rates next week, but the Riksbank doesn’t need to track the ECB as long as the exchange rate is fairly stable,” he said.
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Nordea keeps its forecast that Riksbank will remain on hold over the months ahead, Isaksson said.
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The statistics agency will release its full inflation report for May on June 11.
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—With assistance from Joel Rinneby.
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(Adds details, analyst comment from fifth paragraph.)
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English (US)