A wake-up call for the Riksbank
By Lars Christensen, Founder & CEO, firstname.lastname@example.org, +45 52502506 and Laurids Rising, Analyst, email@example.com, + 45 22880457
This morning we got Swedish inflation numbers for April.
The closely watched CPIF-inflation measure increased to 2.0% y/y in April – up from 1.5% y/y in March and well above the consensus expectation for CPIF was 1.8% y/y.
Headline CPI-inflation rose to 1.9% y/y.
Hence, Swedish inflation essentially is back in line with Riksbank’s 2% inflation target. Furthermore, our indicator for Swedish monetary conditions (see Global Monetary Conditions Monitor) shows that the Riksbank’s monetary stance is too accommodative and as a consequence we expect inflation to continue to rise and CPIF-inflation is likely to increase further above the 2% inflation target over the coming year unless the Riksbank moves to tighten monetary conditions.
We now forecast Swedish CPIF-inflation of 1.9% this year and 2.2% in 2018 and 2.4% in 2019.
The Riksbank should tighten monetary policy
With the Riksbank set to overshoot its inflation target over the coming year we believe that the Riksbank should move to tighten monetary conditions gradually to curb increasing inflationary pressures.
The question, however, is whether or not today’s inflation numbers will convince Riksbank chief Stefan Ingves and his colleagues to change the monetary policy stance in a more hawkish direction or not, but we at least believe this should be a wake-up call for the Riksbank and that it sooner or later will have tighten monetary conditions.
Read more in Global Monetary Conditions Monitor
If you want to read more about our views on Swedish monetary policy see our monthly publication Global Monetary Conditions Monitor where you also can read about monetary policy in 24 other countries and get inflation forecasts for these. See more here.