Swedish underlying inflation eased further from its fastest pace in three decades, as moderating food prices brought relief to the country’s central bank which is planning to dial back the pace of tightening.
(Bloomberg) — Swedish underlying inflation eased further from its fastest pace in three decades, as moderating food prices brought relief to the country’s central bank which is planning to dial back the pace of tightening.
A price measure that strips out energy costs and the effect of interest-rate changes rose 8.4% from a year earlier in April, according to data published by Statistics Sweden on Monday. That was lower than the median estimate of 8.7% in a Bloomberg survey as well as the 8.6% expected by the central bank.
The Riksbank raised its policy rate by half a percentage point to 3.5% in April. While board members outlined smaller hikes ahead, minutes from the meeting showed that they are prepared to act more forcefully if necessary to curb inflation.
The bank’s moves are already having a tangible effect on the Swedish economy, as housing prices have slumped, new-home construction is plummeting and retail sales are plunging at a record pace, with the country set to undergo the worst economic contraction in the European Union this year, according to OECD forecasts.
At the same time, highly leveraged commercial real estate companies are finding themselves in trouble as borrowing costs rise. Last week, fissures in the sector became apparent as one of the country’s largest landlords, SBB, postponed dividends and canceled a rights issue after suffering a debt ratings cut.
While price increases are expected to remain far above the 2% targeted by the Riksbank for the rest of the year, the reading marks a second consecutive slowdown in underlying inflation, from a peak of 9.3% in February. Food prices fell by 1.3% in April from the previous month, marking the first decline since November 2021.
–With assistance from Joel Rinneby.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.