CPIF inflation fell to 2.0 percent in January, Statistics Sweden (SCB) said.
But more important, analysts say, is how underlying inflation develops. Excluding volatile energy prices, underlying inflation fell from 2.3 to 1.7 percent, a much larger drop than economists had forecast.
This is the first time in a long time that underlying inflation is below target, says Susanne Spector.
The Swedish Central Bank's inflation target is 2.0 percent.
So this opens the door to an interest-rate cut, according to Spector.
Torbjörn Isaksson, chief analyst at Nordea, agrees.
This increases the likelihood that there could be an interest-rate cut in the future, but we are not quite there yet, he says.
What speaks against a cut is that lower price increases improve households' purchasing power.
An important factor for the Swedish Central Bank not to cut is that the economy is improving. Even though inflation is low now, there is reason to believe that inflationary pressure is consistent with the inflation target in the longer term. If we see signs of a faltering economy, then it becomes even more likely that the Swedish Central Bank will cut, says Isaksson.
Several members have called for a rate cut in March if inflation falls further. The fixed-income market is pricing a rate cut in the spring at a 50 percent chance.
Both Spector and Isaksson still expect the Swedish Central Bank to leave the interest rate unchanged at the current level of 1.75 percent.
