Economists 'concerned' about higher than expected Swedish inflation
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"There probably won't be a cut to the interest rate until we see confirmation that this was an exception rather than a trend," Alexandra Stråberg, head economist at Länsförsäkringar, told the TT newswire.
CPIF Inflation in June rose to 2.9 percent. Not only was that higher than the 2.3 percent the country saw in May, but it was also higher than expected ‒ economists had predicted a figure of 2.5 percent.
CPIF inflation is the figure used by the Riksbank central bank. It has a target of 2 percent, much lower than the inflation figures reported in June.
"We knew inflation was going to rise but it's a bit surprising that the result was so much higher than expected," Swedbank chief economist Mattias Persson said. "It's gone the wrong way and that's a bit concerning."
These figures are Statistics Sweden's preliminary figures, with more in-depth statistics provided next week.
Persson believed that the increase could be due to so-called base effects, which change when Statistics Sweden make yearly alterations to its measurements.
Stråberg agreed, while adding that the figures were still quite high.
"It's a bit high for that," she said, adding that the figures could make it difficult for the Riksbank to decide how to proceed with its fiscal policy.
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At the bank's last meeting in June, it lowered the key interest rate to 2 percent. The next announcement is scheduled for August 20th, but higher-than-expected inflation figures make the chance of another cut at that meeting less likely.
Robert Boije, head economist at SBAB, believes that the inflation rate for June has all but wiped out any chance of a cut in August.
At the same time, economic recovery is slow, which has lead Persson from Swedbank to predict a cut in September instead.
"I still think we need another cut, and I wouldn't rule out the possibility of them moving that further into the future," he said. "We also need to remember that Trump is set to announce his tariffs this week."
He added that the uncertainty surrounding tariff discussions between the EU, Sweden and the US are "concerning." He's also not convinced that US President Donald Trump will make a U-turn on tariff decisions at the last minute, a behaviour that has led to the coining of the term TACO, 'Trump Always Chickens Out'.
"I think insecurity will rise this week," he said. "I think we've been living in some sort of TACO-coma and am worried that now Trump has passed his budget he believes he can do whatever he wants politically."
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