Previously, Danske Bank had a forecast where the Swedish Central Bank was expected to lower the interest rate in May. It may now need to be revised, according to Susanne Spector.
The Swedish Central Bank – which has 2.0 percent as an inflation target – lowered the interest rate to 2.25 percent in January. The message from the board then was that no further rate cuts seemed necessary in the near future.
The Swedish Central Bank will likely feel strengthened in its message by this figure, says Spector.
Significant increase
The inflation increase to 2.2 percent was significant. It can be compared to 1.5 percent in December. Analysts had on average expected an increase to 1.6 percent, according to a compilation of forecasts made by Bloomberg.
It's surprising. Since it's a quick figure and we don't have the details, we can't say exactly what it's due to, says Alexandra Stråberg, chief economist at Länsförsäkringar.
It could be energy prices or food prices that are driving it – but it can't be said at present, according to Stråberg.
I think it's temporary. We've been around an inflation rate of 2 percent, so we shouldn't overinterpret the monthly figure, especially not before we have all the details.
She notes at the same time that it's an unexpected outcome:
I hope this is a parenthesis in the inflation journey and that we'll continue to be at the levels we've been at previously.
More details will come next week, when the SCB presents a regular inflation report for January.
Spector at Danske Bank notes that the inflation increase looks broad, as it affects both excluding and including energy prices.
"Nothing can be ruled out"
That the Swedish Central Bank would need to start tightening with rate hikes again – to get inflation down – seems far-fetched at present, according to Spector.
It feels far away. The economic recovery is weak. The labor market is still developing in the wrong direction. Rate hikes in this situation are hard to see. But naturally, nothing can be ruled out in the long term.
Inflation in January rose to 2.2 percent according to the KPIF measure, up from 1.5 percent in December. Analysts had on average expected an increase to 1.6 percent.
In the KPIF measure, which the Swedish Central Bank formally uses as a benchmark for its inflation target of 2.0 percent, the effects of mortgage rates have been subtracted. If you include mortgage rates and look at the KPI measure, inflation in January rose to 1.0 percent, up from 0.8 percent.
The underlying inflation – where both mortgage rates and energy prices have been subtracted – rose to 2.7 percent in January. That measure was at 2.1 percent in December.
