Swedish inflation stronger than expected in July

Swedish inflation rose more than expected in July, figures from the Statistics Office published on Wednesday showed, though price pressures remain muted by measures to cub the spread of the coronavirus.

Consumer prices in Sweden, measured with a fixed interest rate (CPIF), rose 0.2 percent in July from June and were up 0.5 percent from the same month last year.

Stripping out volatile energy prices, inflation was 1.5% compared with the same month a year ago, also above forecasts.

The central bank had forecast CPIF inflation at 0% on the year. Analysts polled by Reuters had expected 0.3%.

Although inflation is below the central bank’s 2% target, it is unlikely to prompt a rate cut from the current level of 0%. Central bankers have not ruled out lowering the benchmark repo rate, but believe using the Riksbank’s balance sheet is more effective in boosting economic activity.

Rate-setters are prepared to be patient and are unlikely to cut unless the Swedish crown strengthens rapidly or there is evidence that markets are losing faith in the central bank’s ability to hit the 2% target over the longer term.

So far, inflation expectations have remained steady. Fresh figures are due on Thursday.