Swedish Inflation Turns Higher In February Puts Pressure On Riksbank

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Swedish Inflation Turns Higher In February Puts Pressure On Riksbank

Swedish Inflation Turns Higher In February, Puts Pressure On Riksbank

Core inflation data turned higher for the month of February in Sweden, according to the latest data. This will put the central bank under pressure to introduce more rate hikes during the April meeting.

In fact, Riksbank will have to stick with its tight policy for several months before we see any decrease in inflation.

Swedish Inflation Reached 9.4%

The inflation in Sweden has reached 9.4% and is very close to entering the double-digit territory. But for the most part, the headline inflation was close to the central bank's forecast.

However, the worrying fact is that it will put the Riksbank under pressure to do more against inflation. And if we look at the inflation rate after discounting the energy prices, it increased to 9.3% YoY while it was around 8.7% just a month ago.

The forecast set by the Riksbank was around 8.0%, which means inflation has already crossed the central bank's estimates.

Analysts believe that this is the 2nd consecutive month that inflation has managed to deliver a surprise to the markets. In fact, the inflation has even managed to surprise Sweden's central bank!

There's no doubt that this increase in inflation will make it the top priority of the central bank. That's why a minimum of 50 bps rate hike is highly likely during the April meeting.

And if the central bank fails to keep inflation under control, then the policy rate in Sweden will easily cross the 4% threshold.

After the inflation report and increased chances of a rate hike by the Riksbank, the Swedish Crown turned higher against all major currencies.

During the February meeting, the central bank introduced a rate hike of 0.5% which pushed the interest rate to 3%. After another 25 - 30 bps rate hike, the policy rate will touch 3.33%.

However, one factor which could force the Riksbank to not go with a rate hike during April is the fall of two major banks. However, there's a high chance that Swedish central bank will not pay much attention to the global economy.

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