(Bloomberg) --
Swedish inflation unexpectedly accelerated to above the central bank's target, lending support to its plans to increase interest rates toward the turn of year.
Consumer prices with a constant interest rate rose an annual 2.1%, according to Statistics Sweden. The May reading was higher than economists' estimate of 1.9%, and matched the Riksbank's own forecast.
Key Insights
- Inflation excluding energy prices rose an annual 1.7% in May, compared with the Riksbank's forecast of 1.7% and analysts' estimate of 1.5%
- Sweden's central bank has penciled in a rate hike for late this year or early next year, but its latest rate path is already being questioned by analysts.
- The Riksbank is eager to end years of negative rates, but Sweden's export-led economy is exposed to the global slowdown and central banks around the world are already beginning to discuss rate cuts rather than hikes. Short term inflation expectations in the Nordic region's largest economy fell slightly in May.
- Sweden's 10-year note yield declined to a record low of 0.017% right before the report, then pared some declines.
What Analysts Say
- Knut Hallberg at Swedbank said the reading was “clearly positive for the Riksbank,” adding: “We think this means that the Riksbank can keep its forecast and stick to its planned rate hike this winter.”
- Andreas Steno Larsen at Nordea said Friday's data means there's “a low risk of another dovish tilt from the Riksbank in July.”
- Economists at SEB were surprised at the May reading, adding that the time for rate cuts was “still far away” and would require “a clearly worse growth scenario than we see ahead.”
Market Reaction
- The krona gained 0.4% to 10.655 per euro as of 09:51 a.m.
Know More
- For more details, see this table
To contact the reporter on this story: Amanda Billner in Stockholm at abillner@bloomberg.net
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo
©2019 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
