Riksbank Minutes Show Policy Makers Unfazed by Inflation Jump

(Bloomberg) -- Riksbank officials last week agreed on the temporary nature of a recent surge in inflation while also stressing the need for vigilance even as they see no interest-rate moves on the horizon.

Several of the five executive board members highlighted differences between the inflation acceleration at the start of 2022 and the situation in past months, according to the minutes published on Monday of the monetary-policy meeting held on March 19. 

The broad agreement on inflationary developments underpinned the decision to keep the benchmark rate unchanged at a two-year low of 2.25%, and a wait-and-see stance adopted after an easing cycle of 175 basis points since last May.

“All board members seem convinced that the uptick in inflation is temporary, highlighting the annual adjustment of the weights in the CPI and rapid increases in certain food prices,” Swedbank AB analysts Jesper Hansson, Carl Nilsson and Glenn Nielsen said in a note to clients. 

“We stick to our forecast that the Riksbank is done cutting the policy rate for this cutting cycle but believe that the probability of a cut is higher than that of a hike in 2025,” the analysts added.

Core inflation defied forecasts by accelerating for a second straight month in February, led by food and recreation costs, to 3%, which was the fastest pace in nine months.

Riksbank Deputy Governor Anna Seim said there are currently “no clear signs of global supply-chain disturbances or higher transport costs,” as well as no “pent-up demand amplified by accumulated buffer savings.”

“If we see signs of a lasting and broad rise in the rate of price increase, we will not hesitate to act so that inflation stabilises again at 2%,” Governor Erik Thedeen said.

--With assistance from Rafaela Lindeberg, Christopher Jungstedt and Jonas Ekblom.

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