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INFLATION

Swedish statistics agency published faulty inflation data

Sweden’s central bank was relying on bad inflation data when it decided to raise interest rates last week, Statistics Sweden has revealed.

Published: 9 September 2008 15:36 CEST

According to the agency, it has been miscalculating the estimated price changes for shoes since the start of the year.

“The previously published inflation rates for April through July have therefore been somewhat misleading,” the agency said in a statement.

Statistics Sweden revised July inflation to 4.1 percent, down from the previously published level of 4.4 percent which had been the highest inflation rate recorded in Sweden in 15 years.

Meanwhile, the agency reported that inflation for August was 4.3 percent, up 0.2 percent from the revised figures for July.

The mistake had analysts wondering whether the Riksbank may have acted differently last week if the correct inflation figures had been known.

“It’s interesting against the background that [Riksbank head] Stefan Ingves in a number of interviews singled out the fact that inflation is too high today,” said Henrik Mitelman, head analyst at SEB bank, to the TT news agency.

However, Mitelman stopped short of declaring unequivocally that the revised data would have resulted in the Riksbank leaving rates untouched.

“Ah, it’s hard to say. But it would have been a piece of the puzzle and it would have ended up on the other side of the balance,” he said.

But former Riksbank vice-chair Villy Bergström doesn’t think the interest rate decision would have been different.

“I don’t think that a few tenths of a percent changes the analysis very much, especially when the trend is still that inflation is being pushed up. They are naturally frightened for dispersion effects and those risks still exist,” said Bergström to TT.

In explaining the August price increases, Statistics Sweden said the main driver were higher prices for clothing, which went up 6.9 percent. While prices on electricity, furniture, and mortgage interest also went up, their overall effects were mitigated by lower prices for fuel (down 4.1 percent), vegetables (down 5.5 percent) and package holidays (down 7.4 percent).

ECONOMY

Riksbank deputy ‘open to reconsidering raising rates in April’

Martin Flodén, the deputy governor of Sweden's Riksbank, has questioned whether the central bank needs to bring in further rate rises in April, following bank runs on two niche banks in the US and a crisis of confidence at Credit Suisse.

Published: 16 March 2023 16:20 CET
Riksbank deputy 'open to reconsidering raising rates in April'

Uncertainty in the financial market following bank runs in the US and a crisis at Swiss bank Credit Suisse could have changed the playing field, he told TT in an interview. 

“It affects which level the key interest rates need to be in order to have a contractive effect,” he said, referring to the recent days of financial market turbulence. “We can’t just look at key interest rates by themselves. It’s the key interest rate in combination with all of these developments which determines how tight financial policy will be.”

He said it was not yet obvious what decision should be taken. 

“It’s clear that monetary policy needs to stay tight, but what level of interest is that? We need to assess all of the current developments there.” 

‘Could go in different directions’

In theory, there could be such a serious financial crisis, with such a severe effect on lending and banks’ financing costs, that the central bank would be forced to adopt supportive measures, even lowering the key rate.

Flodén doesn’t think Sweden is in that situation, although he thinks there’s a possibility it could happen.

“It’s not something I can see happening right now, at least, although this could go in different directions.” 

He added that he doesn’t see any reason for any “special concern”, toning down the risk that a crisis for two smaller niche banks in the US and at Credit Suisse could affect the Swedish financial system.

“Of course, it could lead to some stress, but there aren’t actually any particular signs in Sweden, which are worrying me,” he said. 

Flodén is one of six members of the Riksbank executive board, led by Riksbank chief Erik Thedéen, responsible for making a decision on whether interest rates will go up again at the end of April.

The Riksbank has indicated that a rate hike of between 0.25 and 0.5 percent from the current 3 percent rate could be necessary.

Flodén described the most recent inflation statistics for February, where inflation unexpectedly rose to 12 percent, as “not good at all”. So-called KPIF inflation, where the effect of mortgage rates is removed, rose from 9.3 percent to 8.7 percent in January. The Riksbank’s goal is 2 percent.

“It’s clear that inflation is still far too high and that monetary policy needs to be focussed on combatting inflation,” he said, adding that inflation statistics for March will be released before the central bank is due to make a decision on whether to raise rates or not in April.

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