Swedish Inflation Disappointment Delivers Blow to Riksbank

  • Nordea, Danske stick to forecast that Riksbank is done easing
  • Krona slides after inflation slows more than estimated

Swedish inflation slowed more than estimated in May, adding pressure on the central bank to expand its unprecedented stimulus measures at its meeting next month.

Consumer prices rose an annual 0.6 percent in May, compared with 0.8 percent the prior month, Statistics Sweden said in a statement Tuesday. The Riksbank and analysts surveyed by Bloomberg estimated a 0.7 percent gain. Adjusted for mortgage costs, inflation slowed to an annual 1.1 percent, below the 1.2 percent estimate.

Policy makers in Stockholm have signaled optimism that they have turned the corner on an all-out effort to boost inflation, which has held below the 2 percent target since late 2011. They in April eased up on the pace of stimulus and predicted they would reach the inflation goal already next year after cutting rates deep below zero and unleashing a bond buying program to pump money into the economy to propel price growth.

“On the margin, things are moving in the wrong direction again,” said Michael Grahn, an analyst at Danske Bank in Stockholm. “It will be very, very hard to get inflation close to 2 percent” since the central bank is too optimistic on wage growth and imported inflation, he said.

The krona slid 0.3 percent to 9.3280 per euro as of 11:10 a.m. in Stockholm.

While the report once again increased pressure, Nordea Bank is holding to its forecast that the bank is done with its easing, according to Torbjoern Isaksson, chief analyst in Stockholm at the largest Nordic bank.

“It will take a lot for the Riksbank to act,” he said. Triggers could be “more measures from the ECB or that the krona all of a sudden strengthens significantly,” he said.

Both Danske and Nordea don’t see any rate increases at least before the end of next year.

Consumer prices rose a monthly 0.2 percent in May according to both measures, after staying unchanged the previous month.

Before it's here, it's on the Bloomberg Terminal.