Electricity and fuel drive inflation in Sweden: Price growth rises to 1.5 per cent in September
Rising electricity and fuel prices more than doubled inflation in Sweden to 1.5 per cent (CPIF) in September. The Riksbank has already signalled an interest rate rise for November.
Inflation in Sweden picked up significantly in September. According to final figures from the statistics agency SCB, consumer prices measured by the CPIF – the measure the Riksbank targets – rose by 1.5 per cent year on year, after 0.7 per cent in August. The main drivers were electricity and fuel. This increases the pressure on the central bank, which has already signalled an interest rate rise in November.
What the figures show
The statistics agency published the data on Wednesday, 14 October. The general consumer price index CPI rose by 1.1 per cent year on year, after 0.3 per cent the previous month. From August to September, both measures climbed by 0.9 per cent each. Core inflation excluding energy (CPIF-XE), by contrast, remained unchanged at 0.5 per cent.
According to SCB, electricity became 11.7 per cent more expensive within a month, and fuel 13.3 per cent. Compared with the previous year, electricity prices are around 17 per cent higher and fuel prices around 20 per cent higher. Package holidays, rents and restaurant visits also became more expensive. Food prices, on the other hand, had a dampening effect, standing 6.5 per cent below the previous year’s level, as did significantly cheaper dental treatment and local public transport tickets, which SCB partly attributes to recent reforms.
Background: A turn in interest rates in sight
The Riksbank unanimously kept its key interest rate at 1.75 per cent in September. According to the financial news service Finwire, the minutes of the meeting show that several members of the Executive Board expect a rise this year. Riksbank Governor Erik Thedéen reportedly considered a move as early as November to be reasonable; the question now, he said, was more about the pace than whether rates would rise. The central bank cited risks including the weaker krona, rising energy prices and strong demand.
The next interest rate decision has been announced for 4 November. The Riksbank’s inflation target is 2 per cent.
Why this matters
According to the Riksbank, the low inflation of recent months was partly held down by temporary government measures; without them, the CPIF rate in August stood at 2.2 per cent, according to the meeting minutes. What matters, therefore, is whether price increases spread beyond energy to other goods and services. The fact that core inflation excluding energy remained stable in September argues against broad price pressure for now. At the same time, the Swedish economy is growing strongly – the government recently raised its forecast (more on this here).
What this means for travellers and residents
Anyone who lives in Sweden or owns a house should prepare for possible rises in loan interest rates, as a large share of Swedish mortgages have short fixed-rate periods. For holidaymakers from Germany, Austria and Switzerland, higher fuel prices will be most noticeable when travelling by car. Food, on the other hand, is currently cheaper than a year ago. If you still have old krona banknotes, you can find the deadlines for exchanging them here.