Swedish annual inflation hits 8.5% in June, highest since 1991

STOCKHOLM, July 14 (Reuters) – Consumer prices in Sweden rose 8.5% in June from the same month last year and were up 1.2% from the previous month, the statistics office (SCB) said on Thursday.

The central bank targets a consumer price inflation rate based on a fixed interest rate, or CPIF, of 2%.

Inflation has soared in recent months, with prices – essentially static at the start of 2021 – now increasing at a higher pace than any time in the last 30 years.

June inflation was the highest since July 1991.

Analysts had forecast headline inflation of 8.1% against 8.0% expected by the Riksbank.

The rapid rise in prices has forced the central bank into a U-turn on policy. It hiked rates by a half-percentage point to 0.75% at its most recent meeting in June and now forecasts the benchmark rate to hit 2% early next year. 

As late as February this year, the Riksbank had forecast no change in the benchmark rate until 2024.

Central banks around the globe are setting aside worries over growth to focus on inflation.

The U.S. Federal Reserve raised rates by 75 basis points at its most recent meeting and Norway by 50 points. 

The ECB plans to raise its interest rates by 25 basis points on July 21, but has opened the door to a bigger move in September unless its medium term inflation forecasts are cut back to its 2% target.