Tuesday, February 19, 2008

Odd Interpretation Of Swedish Inflation Report

The Swedish inflation report showed lower inflation than analysts and the Riksbank had expected, which now causes bank economists to say the Riksbank won't raise rates anymore.

But didn't these bank economists read the actual report, and especially the fine print of it? Had they bothered to that they would have seen that the entire deviation of 0.3 percentage points and in fact an additional 0.2 percentage points from the forecasts was caused by a technical factor, namely that the Swedish statistical bureau had revised the weights of the bundle of goods and services used to calculate consumer price inflation. Excluding that , inflation was in fact 0.2% higher than the forecasts. One would have thought that people hired as economists by major commercial banks would bother to actually read the report they comment on, but apparently not.

Whether or not the Riksbank will raise interest rates again is uncertain. But it can't be ruled out with inflationary pressures growing and commodity prices going through the roof. And it is certainly a lot more likely than the rate cut these bank economists forecast.


Anonymous Johan said...

Hehe, good observation.
Personally I have, since a couple of months, made an attempt at making my own personal "Cost of Living Index" based on some 20-30 items I consider relevant for me.
It's a bit early so far, but early indications point to around a 10% increase annualized...

9:36 AM  

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