Sweden: Inflation jumped to 6.1% in March

Sweden’s jump in inflation last month has increased pressure on the country’s central bank to move faster in a policy change, as it has previously sought to extend economic stimulus for longer than other affluent nations.

In particular, according to Bloomberg, the central bank inflation target, CPIF, rose by 6.1% year-on-year in March, while economists expected prices to rise by 5.6%.

“Rising prices for electricity, petrol, fuel and restaurants contributed to much higher inflation in March,” Emma Persson, an economist at Lansforsakringar AB, tweeted.

Analysts at Swedbank AB said in a statement that inflation was “arming the Riksbank”.

Sweden’s central bank, the Riksbank, has now paved the way for a radical policy change in April, as its inflation-driven stance was undermined by the effects of the war in Ukraine and accelerating price increases.

In early March, two weeks after Russia’s invasion of Ukraine, Riksbank Governor Stefan Ingves said he saw no need to change the plan to keep the benchmark interest rate at zero until the second half of 2024.

However, according to the Riksbank itself, this plan and the inflation forecast were based on data that is now obsolete.

So after a series of comments from members of the bank’s executive board about adopting an aggressive policy, economists now expect borrowing costs to rise from this year, and some even estimate that a first rate hike will take place at the meeting later this month.

The data released today showed that inflation in energy costs is accompanied by wider price increases. It is characteristic that the measure of inflation that removes fuel and electricity showed an increase in prices by 4.1% on an annual basis, compared to the 3.7% expected by economists.