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Inflation Falls to 1.5 Percent in December
On January 8, 2025, Statistics Sweden (SCB) published the latest inflation report for Sweden, showing that the inflation rate according to the Consumer Price Index with Fixed Interest (KPIF) fell to 1.5 percent in December 2024, down from 1.8 percent in November of the same year.
This decline marks the lowest inflation rate since December 2020 and reflects a continued slowdown in the rate of price increases in the country.
Contributing Factors to the Decline
- Energy Prices: Throughout the year, energy prices have fluctuated, impacting the inflation rate.
- Food Prices: Food prices have seen a moderate increase over the year, affecting overall inflation.
- Housing Costs: Costs for housing, including rents and mortgage interest rates, have increased over the year, contributing to inflation.
The Riksbank, which has an inflation target of 2 percent measured by KPIF, has implemented several interest rate cuts in 2024 to stimulate the economy and counteract low inflation. In December, the policy rate was lowered by 0.25 percentage points to 2.50 percent, marking the fifth cut of the year. However, the Riksbank signaled a more cautious stance heading into 2025, with the possibility of another cut in the first half of the year if inflation and economic developments remain stable.
Adjustments to Economic Forecasts
At the same time, the Swedish government has adjusted its economic forecasts. In December 2024, GDP growth for 2025 was revised down from the previous 2.5 percent to 2.0 percent, while growth for 2024 is expected to land at 0.6 percent, down from a previous forecast of 0.8 percent. Inflation is expected to remain close to the Riksbank's target of 2 percent during 2025.
This combination of falling inflation and adjusted growth forecasts indicates a continued cautious economic development for Sweden in the coming year. Both households and businesses should be aware of these changes and adjust their economic plans accordingly.
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