Swedish inflation at 5-year high

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Higher energy prices took Sweden’s headline inflation rate to a five-year high in February, but its core inflation rate remained low.

Consumer prices rose 0.7 per cent from the previous month, slightly faster than consensus forecasts, bringing the year on year inflation rate to 1.8 per cent, its highest level since February 2012.

The monthly rise was caused by a rebound in clothing prices after January sales, as well as higher prices for package holidays and vegetables.

Sweden’s low inflation rate has encouraged the central bank to maintain its record low interest rates and quantitative easing programme despite the strength of the economy and headaches the stimulus has caused for the government.

Although the headline figure is finally approaching the Riksbank’s 2 per cent inflation target, Andreas Wallström at Nordea pointed to the subdued core inflation rate – which excludes volatile energy prices – of 1.3 per cent in February compared to the same time a year ago, and said he does not expect the central bank to raise rates until April 2018.

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