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Swedish inflation hits target for first time in almost 6 years

Swedish inflation hits target for first time in almost 6 years

STOCKHOLM: Swedish inflation topped the central bank’s target for the first time in almost six years, setting the stage for policy makers to call an end to an unprecedented period of stimulus. Headline consumer prices rose an annual 2.2 percent in July, exceeding the 2 percent target for the first time since late 2011. Analysts surveyed by Bloomberg had estimated a rate of 1.9 percent. Underlying prices rose an annual 2.4 percent, also far above the Riksbank’s 1.8 percent forecast. The krona jumped as much as 0.8 percent against the euro. The Riksbank has been in an all-out battle to boost inflation over the past three years, cutting rates well below zero and pumping money into the economy through government bond purchases. It last month took tentative steps toward starting to normalize policy, removing its easing bias for lower rates as inflation ticked up.

Headline and underlying consumer prices rose 0.5 percent and 0.6 percent, respectively, in the month. Price increases were driven by costs for package holidays, international flights and electricity, the statistics agency said. Analysts cautioned that the bank is not out of the woods yet when it comes to inflation and the jump in July is to a large extent due to temporary factors. “All in all, the high inflation readings are of course good news for the Riksbank,” said Torbjorn Isaksson, chief analyst at Nordea Bank, in a note. “But the bank can’t relax. The deviation from the Riksbank’s forecast is mainly explained by temporary factors and the krona remains important.” Nordea sees a first rate increase in the second half of next year.