There is no drama in this, says Torbjörn Isaksson, chief analyst at Nordea.
The preliminary inflation figures do not provide any details that can explain what is driving the development. But Isaksson believes it could be a fall holiday effect – where foreign travel may have pushed up inflation – and a result of higher energy prices.
The krona strengthened slightly.
Johan Löf, forecast manager at Handelsbanken, is on the same page as Torbjörn Isaksson.
— It's not completely insignificant, but you shouldn't "run" on a monthly figure and I think you should take it cautiously. There is a lot in the economy that suggests that inflation will cool down.
Johan Löf mentions, among other things, a stronger krona, a Swedish economy that is starting to recover, and moderate wage agreements.
— There are things that indicate that inflation will decrease and we should not worry too much.
In the CPIF measure, the effects of mortgage interest rates have been removed and it is this measure that the Riksbank uses in its inflation target of 2 percent.
If you also remove energy costs from CPIF inflation and look at the so-called core inflation – a measure that the Riksbank is focusing a lot on right now – inflation rose to 2.8 percent from 2.7 percent in September, according to Statistics Sweden. The market had expected a decline to 2.6 percent – which was also what the Riksbank itself and Nordea's economists had expected.
The krona strengthened slightly against both the dollar and the euro on the foreign exchange market after the publication of the inflation figures.
“It doesn't have to be that way”
Most analysts expect the Riksbank to leave its key interest rate – currently at 1.75 percent – unchanged in the near future and to remain there throughout next year. This is also the direction of the Riksbank's own interest rate forecast, the so-called interest rate path.
But it doesn't have to be that way, says Isaksson.
He points out that in the fixed income market there is a 60 percent probability of an interest rate increase priced in sometime at the end of 2026.
Consumer prices rose 0.3 percent in October compared to the previous month.
Statistics Sweden will publish a regular inflation report for October next week.
