Riksbank's Thedeen says inflation may not curb rate hikes

STOCKHOLM Reuters - The Swedish central bank might underestimate inflationary pressure and will probably have to stick to its forecasts of another interest rate hike in April, Riksbank Governor Erik Thedeen said on Sunday.

The central bank hasn't curb 9.4% inflation, well above the 2% target, and has raised rates to 3% from 0% a year ago. The benchmark rate was hiked by 50 basis points in February and indicated another hike by 25 or 50 basis points in April.

Erik Thedeen told SVT television that the inflation process is worse than we thought.

Inflation in Sweden went up in February. While headline inflation was 9.4%, underlying price pressures -- stripping out volatile energy prices -- increased to 9.3% year-on-year, up from 8.7% in the previous month and above the Riksbank forecast of 8.0%.

Some economists believe that the Riksbank should pause the cycle of hikes, arguing that higher rates could derail the interest-rate sensitive Swedish economy and cause a financial crisis in a worst-case scenario.

The main scenario remained a hike of 25 or 50 basis points in April and that inflation outcomes since the monetary policy decision in February had been worse than expected, according to Thedeen.

Inflation is predicted to come down quickly, according to our forecasts. The problem is that it has been predicted all through 2022 and it has yet to happen, Thedeen said.

The next monetary policy decision will be made by the Riksbank on April 26.