Sweden’s headline inflation rate picked up further in March. But with inflation likely to remain well below target and the underlying rate unchanged, the Riksbank will likely cut rates further at its late-April meeting.The headline inflation rate rose from +0.1% in February to +0.2%, a bit below the consensus forecast of +0.3% but above the -0.05% estimated by the Riksbank in February. Lower mortgage interest costs and fuel prices were offset in particular by higher prices for restaurants and accommodation and food and non-alcoholic drinks.But underlying inflation held steady in March. The Riksbank’s preferred measure, CPIF, which excludes the direct effect of interest rate changes, held at +0.9%, only a touch above the Riksbank’s forecast of +0.8%. CPIX, which strips out mortgage interest rate payments and tax changes, picked up, to +0.5%. March’s data are encouraging to the extent that they do not reveal renewed price falls. And there are some other tentative signs that the Riksbank’s stimulus policies are having an effect. Most notably, the central bank’s unexpected decision in mid-March to cut the headline policy rate further below zero and increase its purchases of government bonds has prompted a renewed fall in the Swedish krona against the euro. And producer price inflation picked up to 1.9% in annual terms in February.
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