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MONEY

Sweden studies how to save cash from extinction

The Swedish government said Friday it wants to ensure cash can be used for basic necessities as electronic payments come to dominate transactions in the Scandinavian country.

swedish 50 kronor banknotes
Swedish fifty kronor banknotes. The Swedish government wants to ensure people can still use cash to pay for basic items as electronic payments dominate transactions. (Photo by Jonathan NACKSTRAND / AFP)

Only eight percent of Swedes had used cash for recent purchases in 2022 compared to 40 percent in 2010, according to a survey by the Swedish central bank, the Riksbank.

“We need to quickly take another look at being able to pay for certain things in cash, in particular there are groups, for various reasons, have trouble with electronic payment methods,” said Financial Markets Minister Niklas Wykman.

He said the ability to use cash is also important in case of a crisis.

The government said this was shown by the rare cash machines in service seeing a 30 percent jump in withdrawals following the February 2022 Russian invasion of Ukraine.

Such a trend was also seen in several other European countries, such as the Czech Republic and Slovakia, according to the European Cash Management Companies Association.

The government, which has launched a parliamentary panel on the subject, believes it should be possible to pay cash for certain products such as food, fuel and medicines.

“It is difficult to pay with cash in Sweden today,” said the head of the parliamentary commission, Dennis Dioukarev, who noted one million Swedes are excluded from the digital world.

He said it is important that there be more than one payment system available, especially during a crisis.

Sweden’s civil protection agency still recommends citizens keep cash available, although most Swedes now consider physical money an anachronism.

The parliamentary commission is expected to present its proposals by the end of the year.

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MONEY

‘Swift and Eurovision’: Swedish inflation fell less than expected in May

The year-on-year inflation rate fell to 3.7 percent in May, according to new figures from Statistics Sweden.

'Swift and Eurovision': Swedish inflation fell less than expected in May

This is a drop of just 0.2 percentage points in so-called CPI inflation since April. Experts had predicted that inflation would fall by twice as much, to 3.5 percent.

“This is a setback,” Alexandra Stråberg, chief economist at Länsförsäkringar, told the TT newswire.

According to Statistics Sweden, inflation in May was primarily affected by increased housing costs, mainly due to rising interest rates for household mortgages, which pushed up the inflation figure. This was mitigated by some extent by lower electricity, and fuel prices have also had an effect.

“The inflation rate fell in May, even though most service prices increased,” Statistics Sweden statistician Caroline Neander said in a press statement. “It was electricity prices which mainly contributed to the decline.”

Month-on-month, May saw a rise in the prices of transport services – like car rentals, train travel and flights – as well as increased prices for hotel stays, package holidays and food.

This could be due to two major events which took place in Sweden in May: Taylor Swift concerts in Stockholm and the Eurovision Song Contest in Malmö.

“There could be a temporary Swift or Eurovision effect here,” Stråberg said.

The head analyst from Nordea, Susanne Spector, said that this could partially explain the rise, but added that it wouldn’t explain the rise in the cost of services too.

“That’s a risk factor for the central bank,” she told TT.

What does this mean for interest rates?

On June 27th, Sweden’s Riksbank central bank is set to make its next announcement on Sweden’s key interest rate, just one month after it lowered the rate for the first time in eight years.

Even before these inflation figures were announced, Riksbank governor Erik Thedéen made it clear that the bank is not planning on lowering interest rates, stating there would need to be “very large changes” to even begin to discuss it in June – and unexpectedly low inflation figures for May would not be enough on their own.

Now that inflation rates have dropped less than expected, it looks even less likely that the Riksbank will lower the key interest rate in two weeks’ time.

Spector from Nordea believes that the next interest rate drop will be in the autumn.

Länsförsäkringar still predicts three further drops to the interest rate this year, although Stråberg said these figures had increased the likelihood of the bank only cutting the rate twice.

“It depends on next month. There are a lot of months to go which need to confirm the fact that inflation is on a downward trajectory,” she said.

According to chief economist Robert Boije, the most important takeaway from the new figures is the fact that year-on-year inflation did not rise.

“Today’s inflation figures for May from Statistics Sweden don’t give any reason not to believe the conclusion that the spectre of inflation in the Swedish economy has been vanquished,” he told TT.

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