STOCKHOLM, Jan 14 (Reuters) – Headline inflation in Sweden hit its highest level in nearly 30 years in December, data published on Friday showed, heating up a debate over whether the central bank should rethink its belief that temporary price pressures do not need a response.
Consumer prices in Sweden, measured with a fixed interest rate, rose 1.3 percent in December from the previous month and were up 4.1 percent from the same month last year, the statistics office (SCB) said.
The central bank targets 2 percent inflation.
The figure was the highest since December 1993.
Analysts in a Reuters poll had forecast headline inflation at 4.0%. The Riksbank’s forecast, from November, was for inflation to be at 2.93%.
Excluding volatile energy prices, however, inflation was 1.7%, slightly lower than the previous month and something the central bank is likely to point to as supporting its view that price pressures are temporary.
Inflation has surged across the globe as economies have opened up after the first stages of the pandemic, with U.S. consumer prices rising 7% in December with the Euro zone not far behind.
In the U.S. higher prices have led the Federal Reserve to bring forward plans to hike rates, with three hikes likely this year.
In Europe and Sweden, inflationary pressure is seen as more transient and neither the European Central Bank nor the Riksbank are in a hurry to tighten policy amid worries over the effect of the Omicron variant of the COVID virus on economic recovery.
But price pressures have proven more persistent than many central banks initially thought and markets have priced in much faster policy-tightening than the Riksbank currently forecasts.
(Reporting by Simon Johnson; editing by Niklas Pollard)