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INFLATION

Inflation rises more than expected

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.”

INFLATION

Swedish inflation climbs in July

Sweden's inflation rate rose at a higher clip in July than in the previous month, partly due to rising mortgage interest costs, although consumer prices remained flat.

Swedish inflation rose to 3.3 percent in July on a 12-month basis, up from 3.1 percent in June, official data showed Thursday.

Compared with June, July consumer prices were flat, Statistics Sweden (SCB) said in a statement.

It said higher prices reflected a 3.0-percent hike in interest costs for owner occupied housing, a 5.9-percent jump in prices for package holidays, as well as higher costs for fuel and food and non-alcoholic beverages.

These increases were offset by “seasonally normal price decreases for clothing and footwear, with prices falling seven percent, and lower prices for electricity, it said.

According to the European Union’s Harmonised Index of Consumer Prices (HIPC), inflation in Sweden was 1.6 percent in July compared with a year earlier, remaining well below the 2.5 percent inflation rate seen in the neighbouring eurozone last month.

Sweden’s central bank has raised its key interest rate seven times since July 2010, pushing it from 0.25 percent to 2.0 percent, in a bid to stabilise inflation close to its target of 2.0 percent.

The Riksbank has said it plans to continue raising rates on the back of Sweden’s strong economy, which is considered among Europe’s most robust with growth this year forecast at 4.4 percent.

However, economists have in recent days said they expect the bank will backtrack and leave rates unchanged at its next meeting in September due to growing fears of a new global financial crisis.

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