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Swedish inflation is close to seven year low

Thursday, 12 January 2012
Swedish inflation continues to fall. Were it not for higher mortgage rates the general price level in December would have remained unchanged from November. Underlying inflation is now at its lowest in almost seven years.

Inflation was 2.3 percent in December, according to figures from Statistics Sweden. That was down from 2.8 percent in November. The development is in line with analysts' expectations.

On a monthly basis, prices increased by 0.2 percent. For the rise in November were the higher interest expenses, higher prices on alcohol and food and more expensive transport. Lower prices for electricity and clothes and shoes appeared in the opposite direction.


Interestingly, the increased interest expense, contributed to some 0.2 percentage points. Were it not for higher mortgage rates, prices in other words, inflation would have remained constant between November and December. Since the rise in mortgage rates the contribution to the consumer prices index (CPI) gradually decreased.

Underlying inflation, which excludes the effects of the Riksbank's interest rate changes, in December, was 0.5 percent. Nordea notes in a comment that it is the lowest growth rate in nearly seven years. The bank expects, however, an increase in underlying inflation as early as next month because higher electricity prices in December 2010 was dropped from the comparison.

"Looking at the big picture, inflationary pressure is very low and in line with the Riksbank's forecast. The focus is currently on growth. The Riksbank is too optimistic, because we believe that GDP will shrink in coming quarters and unemployment is increasing, we also believe that the Riksbank will lower the interest rate, "writes Nordea.
By Team

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