Why does the Riksbank analyse different measures of core inflation?

Economic Commentaries, News Sveriges Riksbank has had an inflation target of 2 per cent since the mid-1990s and as of autumn 2017, this target is expressed in terms of the CPIF. But to obtain as good an indication as possible of current inflationary pressures and where inflation is heading in the slightly longer term, it is also important that the Riksbank analyses several different measures of core inflation. This is shown in the Economic Commentary “Measures of core inflation in Sweden”.

When the inflation target was introduced in Sweden, it was expressed in terms of the Consumer Price Index (CPI), but since September 2017, it has been expressed in terms of the CPI with a fixed interest rate (CPIF). Unlike the CPI, this measure is not directly affected by changes in household mortgage rates.

However, the inflation rate is also affected by price changes that are deemed to have a more temporary nature. This is why the Riksbank also regularly analyses measures of what is known as core inflation. The main aim of using such measures is to provide an indication of how high the more permanent component of the inflation rate is.

The evaluation in this Economic Commentary shows that different measures of inflation are useful at different points in time or for different periods, and that it is therefore reasonable for the Riksbank to continue to analyse several different measures of core inflation.

Several different measures of core inflation are published on the Riksbank's website.

By Jesper Johansson, Oskar Tysklind, Mårten Löf and Oliver Sigrist. The authors work in the Monetary Policy Department at the Riksbank.

The Riksbank’s Economic Commentaries contain, for instance, short analyses and debate articles. The opinions expressed in Economic Commentaries are those of the authors and are not to be seen as the Riksbank’s view.

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Updated 03/10/2018