Sweden Hit by Highest Inflation in Over 30 Years Amid Anti-Russia Sanctions

Following Russia's special operation in Ukraine to protect the Donetsk and Lugansk People’s Republics, the West responded with severe sanctions, which drove energy prices and inflation rates further up.

The Swedish inflation rate rose to 6.1 percent year-on-year in March, according to Statistics Sweden, reaching its highest point in 30 years. The monthly jump from February to March was 1.7 percent.

According to Statistics Sweden, this is the highest inflation rate according to Consumer Price Index (CPI) since December 1991, when the jump was 7.8 percent. The greatest increases affected food (mainly dairy products), as well as restaurant visits, furniture and cars.

“The inflation rate rose sharply as a result of a general, broad rise in prices. Prices of food and non-alcoholic beverages increased, but above all it was rising electricity and fuel prices that had an effect”, Caroline Neander of Statistics Sweden told national broadcaster SVT.

Meanwhile, SVT financial commentator Kristina Lagerström suggested that one of the reasons behind the increase was Russia's special operation in Ukraine that pushed up energy prices, with a domino effect.

“Now the price increase also spreads to other things we consume”, Lagerström said. “For the wallet, this means that the vast majority will actually have their purchasing power reduced, how much worse depends on the type of goods you usually consume. Most vulnerable are those who have small margins, such as pensioners and single people with children”.

While rising inflation was expected, Statistics Sweden's recent figures exceed fears voiced by analysts. Now, analysts expect Sweden's Central Bank to raise the key rate currently at zero.

Meanwhile, Sweden's neighbour Finland is also seeing prices rise at the fastest rate since the early 1990s. Statistics Finland put the annual inflation rate at 5.8 percent in March.

Overall, Eurozone's annual inflation is estimated at 7.5 percent in March 2022, up from 5.9 percent in February 2022, according to Eurostat.

Russia launched the special operation to “demilitarise and de-Nazify” Ukraine on 24 February, after the Donetsk and Lugansk People’s Republics (DPR and LPR) appealed for help in defending themselves against intensifying attacks by Kiev's forces. The West retaliated with a slew of sanctions, some of which backfired, driving energy prices and inflation rates up.