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(Bloomberg) — Sweden’s underlying inflation held steady last month in a vindicating sign for the Riksbank, which last week became the second major developed-world central bank to cut interest rates.

The core inflation rate, which strips out energy costs and the effect of interest-rate changes, remained unchanged at 2.9% in April, according to a statement from the statistics office on Wednesday. That was lower than the 3% median estimate in a Bloomberg survey of economists as well as the central bank’s 3.3% forecast, published in March.  

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The data validates the Riksbank’s assessment that price pressures are dissipating and inflation is trending toward its 2% target. That view gave policymakers enough confidence to lower borrowing costs for the first time in eight years, moving ahead of its larger peers despite the risk that it would weaken the krona and thereby fuel price increases on imported goods. 

Read More: Riksbank Kicks Off Easing With First Rate Cut Since 2016 

The central bank has indicated that it could reduce borrowing costs twice more before the end of the year, and the April outcome in itself is “not enough to price in another rate cut,” Lars Kristian Feste, head of fixed income at Ohman Fonder, said in emailed comments. “We still expect two cuts from the Riksbank during the second half of the year.” 

What Bloomberg Economics Says…

“April’s data supports our outlook for CPIF inflation dipping below the Riksbank’s target rate of 2% from June onwards. However, with risks to price gains tilted to the upside, we stick to our relatively hawkish outlook for Riksbank policy that sees only two more rate cuts this year.”

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— Selva Bahar Baziki, economist. Click here to read more.

The Swedish currency — the third-worst performer so far this year in the G-10 space of major currency holders — weakened somewhat after the news, trading at 11.6924 per euro as of 8:37 a.m. in Stockholm.

The Riksbank’s CPIF target measure for inflation rose slightly to 2.3% on an annual basis. Economists had expected an increase of 2.4%.

Michael Grahn, Chief Economist at Danske Bank A/S in Stockholm, said the deviation from the Riksbank’s forecasts remained basically intact in April from an outcome for the previous month.

—With assistance from Joel Rinneby.

(Adds comments from economists, updates market reaction from 4th paragraph.)

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