Sweden: Continued Strength in Activity Data and Surveys Still Point to June Interest Rate Rise; Underlying Inflation Below Target but Up to 1.5% in April

Summary

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Despite the current stock market correction, it still seems highly likely that the Riksbank will raise interest rates at its 19 June policy meeting. Positive news about the trade balance, the labour market - with unemployment down and employment up - retail sales, and industrial output was compounded by unexpected jumps in both producer and consumer price inflation, the latter rising to 1.5% in April from 1.1% in March and just 0.6% in February as the impact of high energy prices begins to feed through. Underlying inflation was also up to 1.5%. Three surveys - of purchasing managers, of businesses, and of consumers - all produced upbeat expectations. Only if the stock market correction turns into a crash would the Riksbank be likely to hold back from a rate rise next month.

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Sweden: Continued Strength in Activity Data and Surveys Still Point to June Interest Rate Rise; Underlying Inflation Below Target but Up to 1.5% in April

Recent data all point to rate rise in June...

Although interest rates have not totally dominated the economic scene over the past month, it is fair to say that each piece of economic data has been assessed for its potential impact on the Riksbank's decision at its 19 June monetary committee meeting. Almost all recent data point to healthy economic growth, which may need reining in to prevent it getting out of hand. As a result, until this week's stock market slide, which appears to be a correction rather than the start of a m...

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