Swedish core inflation slowed less than expected in May, adding pressure on the country’s central bank to tighten monetary policy further, as a weak krona pushes the cost of imported goods higher.
(Bloomberg) — Swedish core inflation slowed less than expected in May, adding pressure on the country’s central bank to tighten monetary policy further, as a weak krona pushes the cost of imported goods higher.
A price measure that strips out energy costs and the effect of interest-rate changes rose 8.2% from a year earlier, according to data published by Statistics Sweden on Wednesday. That was higher than the median estimate of 7.8% in a Bloomberg survey as well as the 8.1% expected by the Riksbank.
The reading comes as price pressures are subsiding globally, with data published Tuesday showing that US inflation slowed to its lowest level since March 2021, while consumer prices in the euro zone rose less than expected in May. However, Swedish prices are still rising far faster than the central bank’s target, and the weakness of the Swedish currency complicates the situation for the Riksbank as its efforts are hampered by higher costs of imported goods, mirroring developments in neighboring Norway.
The krona has recently been trading near all-time lows against the euro. That development makes it more urgent for the Riksbank to keep its benchmark rate at a higher level than the European Central Bank, which is widely expected to raise its deposit rate to 3.5% on Thursday. It would bring the ECB rate on par with that of the Riksbank, which has said it expects to hike again later this month or in September.
The increased borrowing costs have exposed weaknesses in Sweden’s private residential market as well as the commercial real estate sector, leading to concern about the fallout as landlords may struggle to secure financing.
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