Sweden's inflation rate has increased from 2.8% to 3% in July, according to preliminary figures from SCB. This rise may delay the Riksbank's plans to lower interest rates, as experts suggest the economic recovery is slow. Seasonal factors like summer holidays might be influencing the inflation spike, but experts believe it may not persist.
Rising Inflation in Sweden: Implications for Interest Rates
Rising Inflation in Sweden: Implications for Interest Rates
Inflation continues to rise, as shown by SCB's preliminary figures. It increased in July from 2.8% to 3%, according to the KPIF measure. "This means the Riksbank might have to postpone a rate cut," says financial economist Sharon Lavie.
The rise in inflation was anticipated.
"This is still a disturbing rain-filled inflation cloud on the August sky. Even though the inflation rate isn't rising as much as expected, it isn't where the Riksbank wants it at two percent," comments financial economist Frida Bratt at Nordnet.
According to Bratt, this suggests there will be no rate cut later in August.
She is supported by Sharon Lavie, financial economist at Lendo.
"The continued increase is something the Riksbank must consider, and it means they might postpone another cut," she says.
The Riksbank indicated in its latest announcement that it might lower the rate once more this year, but the slow recovery of the Swedish economy could affect the forecast.
Holiday Season May Be a Factor
The Quick-KPI does not explain the reasons behind the inflation rate, but the holiday season might be a factor in the increase.
"During the summer months, prices often rise, and that could be a reason. It's not certain this indicates that inflation will continue to rise," says Sharon Lavie.
Felicia Schön, a private economist at Avanza, also believes the increase won't persist.
"I see no reason to worry about a sustained rising inflation. On the contrary, much points to a declining inflation – lower electricity prices, lower fuel costs, more clarity in the tariff conflict, diminishing lag effects, and above all, consumers have no more to give," she writes.
Increase Also in June
The previous inflation announcement came at the beginning of July and showed that inflation had risen more than many experts had expected. At that time, inflation was at 2.8% according to the KPIF measure, where the effects of mortgage rates are excluded.
According to the CPI, which includes all household expenses, inflation was then at 0.7%.
Now, as SCB presents its preliminary figures for July, KPIF inflation is at 3%. The CPI figure has also risen, to 0.8%.
The Quick-KPI is a preliminary measure of inflation published by SCB for almost a year. The confirmed figure will be presented next week.