Hasse Eriksson: Inflation is rising - this is happening now

Inflation is rising sharply - what is happening?

Now it's starting to show. Prices are going up. Something that has been warned about as a result of the war between the US and Iran and the strangled Strait of Hormuz. Inflation measured as CPI rose to 1.1 percent in September compared to 0.3 percent in August. For the CPIF measure – against which the Riksbank measures itself – inflation was 1.5 percent compared to 0.7 percent in August. Wednesday's numbers are on par with forecasts.

The figures are preliminary. More detailed information about what caused the price changes will come in the next week. But Statistics Sweden notes that it is primarily energy prices that are behind the rise. It is thus a consequence of the higher oil prices in the wake of the US-Iran war.

During September, the prices of petrol and diesel as well as electricity have gone up. Food prices probably haven't affected much. In its review for September, the comparison company Matpriskollen also saw no major price increases.

What does this mean for mortgages?

These are the latest inflation figures ahead of the Riksbank's next interest rate announcement on November 4, and an interest rate hike is on the cards. The Riksbank's goal is for inflation according to the CPIF measure to be 2 percent. If inflation appears to be taking off, the Riksbank can raise its key interest rate to slow inflation.

It may seem strange that people are talking about an interest rate increase when, after all, CPIF is at 1.5 percent, well below the target.

But the Swedish figures are artificially low, influenced by the government's previous decisions. It is about the reduced food VAT from 12 to 6 percent. To that can be added reduced taxes on fuel and the halving of public transport prices.

The Riksbank looks more at inflation, where temporary effects are excluded. At the time, the figure was around 2 percent at the latest interest rate announcement on September 24. The Riksbank also stated that: "Indicators indicate that inflationary pressure is still above normal and inflation is expected to rise in the near future."

This suggests that the Riksbank will raise the interest rate - which gives higher variable mortgage rates - already at the next announcement on November 4.

What further speaks for it is that in the minutes from the last interest rate meeting, two members said that they thought an interest rate increase was needed in November.

"My assessment today is that it is reasonable to raise the interest rate as early as November," said Riksbank head Erik Thedéen, for example.

What happens now?

Recently, there have been figures from several European countries that inflation is climbing upwards. Sweden will hardly be an exception.

Although food prices did not contribute to the rise in September, there are signals that food prices are in the starting pits to start moving. In its latest survey, the research company Matpriskollen sees signs that the store chains will start raising prices.

What will determine the development is whether the price of oil will remain high as a result of the uncertainty surrounding the war between the US and Iran and the problem with the Strait of Hormuz. Another factor is whether the Riksbank can keep inflation in check with interest rate increases. To the equation, you can add what consequences the weather phenomenon El Niño will have on the harvests.