Sweden’s producer price index (month-on-month) rose to 2.4% in January. This was up from -1.1% in the previous period.
The change shows a shift from a monthly fall in producer prices to a monthly rise. The latest figure indicates higher producer prices compared with the month before.
Producer Prices Reverse Higher
The recent Swedish producer price data for January shows a sharp reversal, jumping from a -1.1% decline to a 2.4% increase month-over-month. This is a significant inflationary signal that challenges the view that price pressures were fading. We must now reconsider the market’s expectation for the Riksbank’s policy path in the coming weeks.
Given this data, the probability of the Riksbank cutting interest rates in the first half of 2026 has significantly decreased. We should anticipate a more hawkish tone from central bank officials, similar to what we observed in early 2025 before the policy pivot. Derivative markets, which had priced in at least a 25 basis point cut by July, will need to swiftly adjust to a “higher for longer” rate scenario.
For interest rate traders, this suggests positioning for higher short-term rates. Paying fixed on Swedish interest rate swaps (IRS) for the 2-year tenor looks attractive as the market reprices away from rate cuts. Remember the sharp sell-off in Swedish bonds we saw in late 2024 when inflation last surprised to the upside; a similar dynamic could play out now.
In the foreign exchange market, the Swedish Krona (SEK) is now poised for strength, particularly against the Euro. As of this week, the European Central Bank is still signaling a potential rate cut by summer, creating a clear policy divergence that favors the SEK. We should consider buying call options on the SEK against the EUR, targeting a move in the EUR/SEK cross back towards the 11.15 level seen in the fourth quarter of 2025.
This inflation surprise creates headwinds for Swedish equities, as higher potential borrowing costs can pressure corporate margins. The OMXS30 index, which rallied nearly 4% in January 2026 on hopes of monetary easing, is now vulnerable. We should look at buying put options on the index as a hedge or a directional bet on a market correction in the near term.
