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Inflation rises more than expected

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12:59 CET+01:00
Swedish inflation rose sharply in October, according to new official figures, with the markedly higher cost of homes accounting for much of the rise. Analysts said they were surprised by the rise.

Inflation was at 2.7 percent in October, compared to 2.7 percent in September, according to Statistics Sweden.

Analysts had expected price rises of 0.3 percent in October and an inflation rate of 2.5 percent.

Inflation is the average change in consumer prices over the past twelve months.

Underlying inflation, which excludes interest costs for owner-occupied houses, rose by 0.5 percent from September to October. The year-on-year rise was 1.4 percent, compared with 1 percent in September.

Large rises in housing costs is having a major effect on inflation. Since last October, the cost of housing has risen by an average of 4.1 percent. This accounts for nearly half of the total price rises.

Also contributing to the higher figure were increases in the price of tobacco (up 17 percent since last October), groceries (up 2.9 percent) and fuel (up 7.2 percent).

"This was higher than expected, particularly on clothes, shoes and groceries," said Bengt Roström, interest rate analyst at Nordea.

But despite the sharp rise in the inflation rate, underlying inflation is still significantly lower than the Swedish central bank's target of 2 percent. It is this figure that dictates the Riksbank's interest rate policy.

"Underlying inflation will rise to two percent and then remain there," said Roström.

"We are sticking by our prediction that the Riksbank will raise rates in February."

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