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Krona strengthens as Swedish inflation beats forecasts again

The Swedish krona jumped to its strongest level in more than two months on Thursday morning after new inflation figures beat forecasts for a second straight month, lending further support to the central bank’s recent moves to edge away from monetary stimulus.

Year on year consumer price inflation stayed steady at 1.7 per cent, in contrast to economist expectations that it would slip to 1.6 per cent. Consumer price inflation with a fixed interest rate – which will soon become the Riksbank’s official inflation measure – was even better, sticking just below the central bank’s 2 per cent target at 1.9 per cent.

On a monthly basis, CPIF – which is less skewed by the Riksbank’s record low interest rates – increased by 0.1 per cent, in contrast to expectations of 0.1 per cent deflation.

The Riksbank has remained one of the most dovish of the major central banks, consistently refusing to budge from its negative interest rates and quantitative easing despite Sweden’s strong growth. Increasing hawkishness from other central banks has encouraged it to soften its stance, however, and last week it acknowledged it is no longer likely to cut rates further.

The shift in tone has helped the krona to recover after weakening more than 4 per cent between February and late June, when a number of senior central bankers made hawkish speeches at an ECB forum in Portugal.

On Thursday it strengthened as much as another 0.56 per cent against the euro, to a high of SKr9.5502 per euro.