Sweden’s January CPIF and CPIF excluding energy matched flash estimates. Services inflation was lower than expected, with core services prices (excluding foreign travel and administratively set prices) declining.
Car rental prices dropped, and hotel accommodation prices fell, described as seasonal. Goods prices fell too, but by less than expected.
Inflation Details Point To Softer Outlook
Nordea said the breakdown of the data points to a weaker inflation outlook and may lead it to lower its inflation path. Nordea’s forecast for CPIF excluding energy was already below the Riksbank’s view before the January figures.
Nordea still expects the Riksbank to keep the policy rate at 1.75%. It said a rate cut is now a clear possibility.
The latest inflation figures for January 2026 showed a significant surprise on the downside for services prices. Core services inflation fell more than we anticipated, with notable drops in car rentals and hotel accommodation. This unexpected softness is a key detail for the Riksbank.
Overall, we view these details as dovish, suggesting a lower path for inflation ahead. Because of this, we are reassessing our inflation forecast downwards. While we still expect the Riksbank to hold its policy rate at 1.75%, a rate cut is now clearly possible.
Market Implications For Rates And SEK
This comes after the Riksbank aggressively cut rates from a peak of 4.00% through 2024 and 2025 to steer the economy. The recent economic upturn has been strong, with GDP growing by 0.7% in the last quarter of 2025, which complicates the bank’s decision. This strength is the main argument against an immediate rate cut.
For traders in interest rate derivatives, this data suggests positioning for the possibility of a more dovish Riksbank than previously expected. The market may begin pricing in a higher probability of a rate cut later this year, putting downward pressure on front-end government bond yields. Options strategies that profit from falling short-term rates, such as buying put options on Swedish interest rate futures, are now more attractive.
This dovish turn should also be watched in the currency markets, specifically for the Swedish krona. The prospect of lower rates relative to other central banks could put renewed downward pressure on the SEK. Traders could consider buying put options on the krona against the euro to speculate on further weakness.
