On Wednesday, two seemingly completely separate reports came out, but which belong together - and which jointly warn that an interest rate shock may be on its way to the world and Swedish households.
One is Statistics Sweden's latest inflation statistics, which show that prices in Sweden in September rose twice as fast as the month before.
According to Statistics Sweden, the main reason for the rapid rise in prices is clear: energy prices. And that, as I recently wrote about, is probably just the beginning. During the autumn, the price of fossil fuels is expected to rise sharply globally, mainly due to the Iran war. In Sweden, prices will be further pushed up by the Tidö government's temporary tax cuts on petrol and diesel expiring.
This is not only difficult for the person who drives a fossil car. Higher energy prices quickly spread to other areas and increase inflationary pressure - and with that comes higher interest rates. Most economists now foresee the Riksbank raising the policy rate this winter.
The second report is more serious. On Wednesday, the world meteorological organization WMO published yet another warning about how the climate phenomenon El Niño is now rapidly increasing in force.
The climate phenomenon, which returns every few years, causes the global average temperature to take a leap upwards - but what is happening this time is something unique. The current El Niño looks set to be by far the most powerful on record, roughly equivalent to the warming caused by 10 years of constant burning of coal, oil and gas. This means that 2027 is likely to be the hottest year recorded globally.
With this comes worse extreme weather across the globe. Exactly how it will affect is uncertain, but generally Australia, Southeast Asia, southern Africa and large parts of South America are expected to be affected by drought, heat waves and fire risk. The Indian monsoon may weaken. In the southern United States, intense precipitation and the risk of flooding are expected.
Extreme weather is, as the research company S&P states in the economic podcast The Decisive, an issue for more than those who are directly affected. Super-el-Niño risks developing "into a global supply shock that disrupts food production, energy systems, mining, transportation and trade, while contributing to inflation and political instability," notes S&P.
The El Niño shock comes at a particularly sensitive time because - as Statistics Norway's statistics show - we are already feeling the effects of the fossil energy crisis, rising prices of fossil-based fertilizers and a troubled environment.
- This will affect all economies globally, says Justin Valentino, head of risk quantification at S&P, in the podcast.
Economists expect El Niño to hit the world economy through three separate channels:
● The energy system is under even more pressure, through lower supply from hydropower and increased demand for energy for cooling. This is problematic for Europe, among other things because of the low gas stocks ahead of winter.
● Extreme weather hits ports and global bottlenecks, putting further pressure on logistics chains. This has already been seen in the Panama Canal, which was forced to reduce traffic due to water shortages.
● Reduced food production due to the drought. You can already see how the global price of sugar has increased by 25 percent, something that is linked to El Niño.
The most serious warnings come around food prices. The European Central Bank ECB warned in its latest Economic bulletin from September that the climate phenomenon could push up food prices more than expected. Among other things, rice, cocoa, coffee and palm oil are pointed out by experts as goods that can rise sharply in price.
The cumulative effect is that El Niño, if it goes badly, can push inflation up further in the coming months in an already very sensitive situation. In that case, the effect could be further interest rate increases that hit Swedish households.
Incidentally, this phenomenon – that climate change hits the world economy and drives up inflation – has a name.
It's called heatflation.
We'll hear it again.
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