The interest rate announcement comes after six interest rate cuts totaling 1.75 percentage points since May 2024. But also after two months in a row – January and February – with unexpectedly high inflation in Sweden.
In February, the KPIF inflation rate rose to 2.9 percent – a good bit above the Swedish Central Bank's target of 2.0 percent and the Swedish Central Bank's forecast of 2.3 percent.
Believes inflation will pass
The Swedish Central Bank is significantly raising its inflation forecast for the year, from 2.0 to 2.5 percent on average. But the main scenario is that "inflation is transitory", according to Erik Thedéen.
What is driving it is food prices – such as cocoa, coffee, and dairy products – but also foreign travel and rents. There are also so-called base effects, as the basket of goods used by Statistics Sweden to calculate inflation has been adjusted at the turn of the year.
Erik Thedéen does not think the situation feels the same as before the inflation shock in 2022, when price increases came on a broad front. But he is not entirely sure.
We cannot be certain that what we are seeing now – cocoa, coffee, or dairy products – is just a transitory supply disruption. It could spread, he says.
We are also getting a slightly stronger demand, which can fuel inflation. That is my concern, that the assessment that this is transitory turns out to be incorrect, he adds.
Global development "dramatic"
Regarding food prices – which have led to strong protests among households and boycotts of certain retail chains – Thedéen welcomes the government's call for a meeting with food giants:
I welcome the pressure being put on the food industry. Anything that can increase competition and transparency in pricing is welcome in general, but also for monetary policy.
Thedéen describes the global development as "dramatic" when it comes to the Trump administration's trade war and sharp geopolitical shifts around the Ukraine war and the US's readiness to defend European NATO countries.
The strengthening of the krona in the turmoil is welcome, however, as this reduces the risk of imported inflation. And the massive investments in defense and infrastructure planned in Europe – particularly in Germany – are also positive from a Swedish perspective, according to Thedéen.
However, this entails an increased risk of fiscal problems in EU countries with poorer conditions, he adds.
The Swedish Central Bank expects the so-called KPIF inflation rate – where the effects of mortgage rates have been excluded – to fluctuate around 2.5 percent this year. This can be compared to the Swedish Central Bank's target of 2 percent in KPIF inflation.
In its previous forecast from December, the Swedish Central Bank expected a KPIF inflation rate around the target under 2025.
For 2026 and 2027, the Swedish Central Bank's forecast for KPIF inflation remains at 1.9 and 2.0 percent, respectively.
The GDP forecast for 2025 is marginally raised to 1.9 percent, from 1.8 percent in December. For 2026, the GDP forecast is slightly lowered to 2.4 percent, from 2.6 percent, while it is raised to 2.2 percent in 2027.
Unemployment is expected to peak at 8.7 percent this year, which is higher than the previous forecast of 8.4 percent. The Swedish Central Bank then expects unemployment to decrease to 8.1 percent in 2026 and 7.7 percent in 2027.
