Swedish inflation falls back in January

Consumer price growth in Sweden was softer than expected in January, as a recent rally in the krona threatens the central bank’s long-sought rise in inflation.

Prices declined by 0.7 per cent in the month as expected, but year on year growth of 1.4 per cent – down from 1.7 per cent the previous month – was lower than economists had predicted.

Sweden’s inflation rate usually declines in January as a result of sales of items such as clothing and footwear, but this year’s 0.7 per cent fall was more than twice as large as in 2015.

The fall, the first since September, is a blow for the Riksbank, which has been working to boost the country’s stubbornly low inflation rate. On Wednesday the bank stressed its willingness to take further stimulatory actions to boost inflation despite the strength of the economy.

A weak krona which raised the price of imports had helped inflation to climb in recent months, but the currency has rallied more than 6 per cent since it hit a post-financial crisis low in November, prompting the Riksbank to extend its mandate allowing it to intervene in currency markets.

Chart courtesy of Bloomberg