Sweden's inflation could rise by 1–2 percentage points this year due to the Middle East war, says professor emeritus Lars Calmfors. He points to rising energy prices after Iran closed the Strait of Hormuz. A VAT cut on foodstuffs will meanwhile mitigate the effect.
Lars Calmfors, professor emeritus in international economics and researcher at the Research Institute of Industrial Economics (IFN), warns that inflation could rise by 1 or 2 percentage points this year due to the war between Israel, the USA, and Iran. The Riksbank targets 2 percent annual inflation measured by KPIF, which stood at 1.7 percent in February. “I would not be surprised if this year's inflation turns out 1 or 2 percentage points higher than previously thought,” says Calmfors. A VAT reduction on foodstuffs from April 1 will pull inflation down. “If not excluding it, this year's inflation measured by KPIF still need not exceed 2–3 percent,” he adds. The measure is described as timely amid price rises in fuels, energy, and fertilizers. On March 2, Iran closed the Strait of Hormuz, through which 20 percent of the world's oil and gas passes, driving up energy prices. US President Donald Trump threatened attacks on Iranian power plants within 48 hours overnight to Saturday unless the strait reopens. Iran responded with threats against US infrastructure, including energy and desalination plants, per Bloomberg. The war is in its fourth week with no end in sight, says SEB senior economist Robert Bergqvist, pressuring stock markets toward stagflation. IG analyst Tony Sycamore warns of a “black Monday” on the exchanges.
