Riksbank’s Flodén says inflationary pressures are too high

Inflationary pressures in Sweden remain too high, Sveriges Riksbank deputy governor Martin Flodén said in a speech today (October 19).

Last month, the consumer price index with fixed interest rate (CPIF) increased year on year by 4%, down from 4.7% in August. The central bank’s target is 2%.

Nonetheless, “the rapid decline is largely driven by energy prices being considerably lower than last year”, Flodén pointed out. “When energy prices are excluded, inflation was 6.9% in September.”

At its latest policy meeting in September, the Swedish central bank increased the policy rate by 25 basis points to 4%. The Riksbank added “monetary policy needs to be contractionary for a longer period of time” to bring inflation down to the target.

In fact, the policy rate forecast indicates it could be increased further.

Flodén stressed the costs of international travel and fruit and vegetables have recently increased faster than the Riksbank’s forecasts. Furthermore, these products “have a large import element”, he added. In this context, “the weak krona is not helping the fight against inflation”.

The central bank’s executive board has previously indicated the krona may have a greater impact than usual on prices at a time when inflation is high. “Perhaps it is such an impact that we are beginning to see in the inflation figures for September,” said Flodén.