Inflation is rising and reaching its highest point in 31 years.
What does it mean and what do you need to think about?
Aftonbladet’s financial reporter Andreas Cervenka answers five questions.
This is when goods and services rise in price, that is, you get smaller things for the same amount of money. Another way of expressing inflation is that money decreases in value. In Sweden, it is measured as the so-called consumer price index, the CPI. It is a kind of basket of goods that should represent what we usually spend money on and then you follow how the price of these develops.
There are several reasons. One explanation is Russia’s invasion of Ukraine. It has caused both the price of energy and food to rise. The pandemic has also affected, as there was a shortage of many things after all the shutdowns. Another factor is that many countries stimulated the economy during the corona crisis by sending money to citizens so that they could continue to consume. In addition, the interest rate has been low, which encourages us to spend.
If inflation is higher than wage increases, we get less money to move around with, we become poorer. This can lead to a spiral of sharply rising wages, even higher prices and so on. In the worst case, hyperinflation can occur as money quickly becomes worthless. Therefore, it has been concluded that low and stable inflation is best. In Sweden, the target is 2 percent per year.
Yes. Most things in Sweden have become more expensive in recent months, from food to clothes and restaurant visits. To try to bring down inflation, the interest rate is raised, which makes it more expensive for everyone who has a loan.
Many in Sweden will probably review their expenses. When negotiating your salary, it is also important to remember that right now income will fall if you deduct inflation. Having money in a bank account that gives 0 percent interest is also a bad idea.