Wage rise not enough for Sweden's inflation to stabilise at around 2%

Sweden's labour market data released last week showed that employment rose by 0.4% m/m after the drop by as much in December. The labour force also increased, showing that the trend with an improving labour market remains robust.

Details however suggest that the Swedish labour market is still tight. Indicators suggest that the demand for labour remains high. As a consequence, wage increases will rise but most likely not enough for inflation to stabilise at around 2%.

"The labour market improved a bit more than expected in January. he January reading is in line with the Riksbank's forecast (6.9% on average for Q1). Don't be fooled by the unemployment number at 7% - the labour market is tight." said Nordea Bank in its report.