Inflation is low in Sweden. Lower than in many other countries and well below the Swedish Central Bank's inflation target.
However, higher global energy prices, raw material prices and freight prices - effects of the war in the Middle East, the war in Ukraine and the weather phenomenon El Niño - are expected to accelerate the rate of price increases in Sweden going forward.
The krona weakens
The recent, clear weakening of the krona is another factor that in itself creates inflation via imports. The krona's fall - down by more than 25 öre against the euro since the beginning of August - has accelerated in the wake of monetary policy tightening in Europe and the US.
The krona is being weakened by the growing gap between the Swedish policy rate - at 1.75 percent - and the policy rates in the eurozone and the US, which have been raised to 2.50 and 3.75-4.00 percent, respectively.
"You can expect the Swedish Central Bank to raise its inflation forecast compared with the June forecast. A lot has happened," says Susanne Spector, chief economist at Danske Bank.
We are approaching a boom next year. And if the Swedish Central Bank raises interest rates this autumn, it will have full effect sometime towards the end of next year. In that sense, it is reasonable for the Swedish Central Bank to act - and quite soon, she adds.
The fixed income market is pricing in four or five increases in the key interest rate in just over a year. Spector - and many other analysts - expect two increases to be sufficient.
"It's based on the inflation forecasts we have now. What the market is probably pricing in is the idea that inflation forecasts will be revised upwards and that the situation for commodity prices will continue to deteriorate. We don't have that in our main scenario," she says.
Affects mortgage rates
Higher policy rates aim to curb inflation by raising interest rates in the economy. This slows banks' lending, which in turn dampens household consumption and business investment.
A direct effect of a higher policy rate is upward pressure on variable mortgage rates. But it can also indirectly - through expectations of future interest rate increases - lead to higher long-term market interest rates, rent increases and increased tenant-owner fees.
