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Swedish inflation drops below 4 percent for first time in two years

Emma Löfgren
Emma Löfgren - [email protected]
Swedish inflation drops below 4 percent for first time in two years
Swedish inflation beat expectations on Wednesday. Photo: Fotograferna Holmberg/TT

Sweden's consumer price index fell to 3.9 percent in April, reinforcing predictions that the central bank will keep lowering interest rates this year.

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The yearly inflation rate according to the consumer price index (CPI) was down from 4.1 percent in March, according to number crunchers Statistics Sweden.

Experts had predicted an inflation rate of 4.0 percent, according to Bloomberg.

“The effect of increasing interest rates for household’s mortgages is easing, which can explain the decreasing inflation rate in April,” Statistics Sweden analyst Carl Mårtensson said in a statement.

Inflation measured instead according to the CPIF metric – the consumer price index with interest rate fluctuations taken out of the equation – meanwhile rose slightly from 2.2 to 2.3 percent.

However, that still beats expectations, which had predicted CPIF inflation of 2.4 percent.

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That puts it slightly above the Riksbank’s inflation target of two percent, and experts predicted that Wednesday’s inflation news strengthened the likelihood that the bank will cut interest rates further.

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The Riksbank last week slashed Sweden’s so-called policy rate for the first time in eight years.

The policy rate is the central bank’s main monetary policy tool. It decides which rates Swedish banks can deposit in and borrow money from the Riksbank, which in turn affects the banks’ own interest rates on savings, loans and mortgages.

If bank interest rates are high, it’s expensive to borrow money, which means people spend less and as a result inflation drops.

But now that inflation appears to be holding relatively steady around the two percent target, it means that the bank might be able to start lowering the policy rate yet again.

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