ING expects the Riksbank to keep interest rates unchanged through 2026, even if inflation dips to about 1%. It links this to stronger growth and earlier policy easing, which may reduce the case for more cuts.
CPIF inflation is forecast to fall to a 1.0% low in 3Q26, with the drop mainly driven by VAT cuts. The view also incorporates a return of inflation to near 2.0% in 2027.
Market Pricing And Rate Cut Expectations
Recent softer inflation readings and a dovish remark from Per Jansson have led to renewed talk of another cut. Markets are pricing about 15bp of easing by June, which ING expects to be reversed, providing some support for the Swedish krona.
Even with steady policy, Swedish yields below 2% place the krona near the bottom of the G10 carry range. From 2015 to 2017, EUR-SEK two-year swap spreads were often similar to, or wider than, current levels while EUR/SEK mostly traded between 9.00 and 10.00.
The Riksbank is expected to keep interest rates on hold throughout 2026, creating a stable policy environment that should support the Krona. With Sweden’s GDP growth beating expectations at 0.5% in the last quarter of 2025, the central bank has little reason to cut rates further. This provides a clear signal for traders to reconsider bets on monetary easing.
While inflation is forecast to temporarily dip to 1% later this year, this is largely due to tax changes and is already factored into the Riksbank’s thinking. More recent data, like the January CPIF print of 1.9%, shows that underlying price pressures are still present. This confirms Governor Thedéen’s neutral stance and suggests the bank will look through any temporary weakness.
Implications For Sek Positioning
The most immediate opportunity comes from the market pricing in approximately 15 basis points of cuts by June, which we expect to be proven wrong. Derivative traders should consider positioning for this pricing to be unwound, which would push short-term Swedish rates higher and lend strength to the SEK. This could involve using options to bet on a lower EUR/SEK or USD/SEK in the coming months.
The Krona’s low yield of sub-2% makes it unattractive for simple carry trades, but this should not be a major deterrent. Looking back to the 2015-2017 period, we saw similar rate differentials, yet the EUR/SEK pair traded significantly lower, often between 9.00 and 10.00. This history suggests that a stable policy backdrop alone can support SEK appreciation, even if its yield remains low.
