Fact: This is how inflation is predicted to be
Swedish inflation (according to the CPIF measure) in October is predicted to land at 9.8 percent, according to Bloomberg’s forecast compilation among economists.
In September, inflation was 9.7 percent.
CPIF, which is the Riksbank’s measure for the inflation target of two percent, is the consumer price index (CPI) minus the effects of interest rate changes.
Currently, the Riksbank’s key interest rate is 1.75 percent.
In both the US, and also the rest of the world, the stock markets danced upwards with pure joy on Thursday over the US inflation figures. It unexpectedly fell to “just” 7.7 percent, which was lower than the 7.9 percent that financial market speculators had believed.
— There are reasons to believe that there is now a turning point, says Torbjörn Isaksson.
But not quite yet in Sweden. On Tuesday, the Swedish inflation figures for October will be released.
— It will take a while longer before Swedish inflation moderates. The US is ahead of us, and it has also been a different situation there, says Alexandra Stråberg, chief economist at Länsförsäkringar.
Inflation, the price changes on an annual basis, in Sweden is estimated to land at 9.8 percent, according to the CPIF measure, marginally up from 9.7 percent in September.
This affects inflation the most right now:
Electricity prices are going down
In October, the electricity price fell sharply, to around 80 öre per kWh in the southern half of the country, compared to the record level of three kroner in August, but also somewhat lower than October last year.
“It reduces inflation by one percentage point lower than what the Riksbank had expected,” says Torbjörn Isaksson.
In November, the effect could be even greater, if the price level this far into the month, 45 öre/kWh on average, holds.
“That could mean two percentage points lower than what the Riksbank had calculated,” he says.
But it may be temporary. The risk is still evident of high electricity prices this winter, even if it has been reduced.
The food pulls up
Food prices have risen by around 16 percent in one year, September compared to September 2021 according to Statistics Sweden, and contribute greatly to lifting overall inflation. And that trend continues, predict the economists.
“Food prices can continue to rise even in November and December,” says Isaksson.
Service prices are rising
Service prices also continue to rise month by month. This applies to everything from rents, hotels and restaurants, hairdressers and transport and more.
— There are lingering effects here from strong demand. The high energy prices have secondary effects, says Isaksson.
— Inflation has spread so much now. The electricity price has been volatile, and this will be reflected in inflation in the coming months, says Alexandra Stråberg.
Länsförsäkringar’s chief economist Alexandra Stråberg. Archive image.
So overall. Inflation has hardly peaked in Sweden yet, is Isaksson and Stråberg’s conclusion.
Completed after the turn of the year?
However, the fact that US inflation appears to be on the way down may cause the US central bank, the Fed, to cut back somewhat on the pace of rate hikes. And it also relieves the pressure on the Swedish Riksbank, which, in order to defend the value of the krona, is forced to rely on the Fed.
The main scenario that the Nordea economists have now is that the Riksbank raises 75 or maybe only 50 points before the end of the year and another 0.25 percentage points at the beginning of next year.
“But it could actually be the case that the Fed does not raise next year, and then the Riksbank could also refrain from raising next year,” Isaksson says of a possible, but not the most likely, development.
— But you can at least start to see the end of the increase cycle. We are not there yet, but there are opportunities for that, he continues.
Thus, the expected recession next year would not have to be as deep.
— The economic outlook is still worrying. But the risks for the really gloomy economic scenarios have decreased, concludes Torbjörn Isaksson.