Swedish inflation surge paves way for big hike by Riksbank

STOCKHOLM, Sept 14 (Reuters) – Inflation in Sweden surged again in August, figures from the statistics office showed on Wednesday, with the outcome likely to force the central bank into an aggressive rate hike later this month.

Consumer prices in Sweden, measured with a fixed interest rate, rose 1.5 percent in August from the previous month and were up 9.0 percent from the same month last year, the statistics office (SCB) said.

Headline inflation hit its highest level since June 1991. August inflation came in above analysts’ expectations of 8.8% and the central bank’s June forecast of 7.5%.

The Riksbank delivered its biggest hike in more than 20 years in June, taking the benchmark rate to 0.75% from 0.25%. It said it would need to do more over the coming months with rates likely to reach around 2% at the beginning of next year.

But inflation has proved more persistent and prices have topped the Riksbank’s forecasts and many analysts now expect it to have to do more and faster.

Central Bank Governor Stefan Ingves had already said the Riksbank must act forcefully, despite worries that the economy is heading into a sharp slowdown.

Many analysts believe the Riksbank will take a leaf from the play book of the European Central Bank and the Federal Reserve and hike the benchmark rate by three quarters of a percentage point and August’s figures will only fuel that expectation.

The central bank targets 2 percent CPIF inflation.

(Reporting by Simon Johnson; editing by Niklas Pollard)