By Greta Rosen Fondahn, Reuters
STOCKHOLM, April 16 (Reuters) – Sweden’s central bank must be vigilant regarding potential spillover effects on inflation from the war in the Middle East, particularly from increasing energy prices, Riksbank Deputy Governor Per Jansson said on Thursday.
Jansson said the war was causing considerable uncertainty, but added that the situation was very different from that in 2022, when inflation began to soar, pointing to lower inflationary pressures, weaker demand and a stronger Swedish crown.
“This means that the risk of spillover effects is lower now than it was then,” Jansson said in the summary of a speech.
He said the impact of higher oil prices on inflation was likely to be gradual, but that it was too soon to draw any far-reaching conclusions.
“It feels a little more stable now,” he told reporters.
“The market seems to have made that interpretation too, the oil price has come down, rates have come down a little, the stock markets are up, but these are very difficult issues that need to be resolved now,” he said.
The Riksbank kept its key rate at 1.75% at its most recent policy-setting meeting, adding it expected no change for some time to come, though it cautioned that the Middle East war made the forecast uncertain.
Markets are pricing in one rate hike by year end. 0#RIBA=
The bank, which targets 2% inflation, is due to post its next rate decision on May 7.
The statistics office said this week annual headline inflation in March was 1.6%.—Reuters
