Rising Inflation Delays Expected Interest Rate Cuts

Inflation is now unexpectedly rising again. Alarming, according to economists. - It will probably be no interest rate cut until you see that this was an exception and not a trend, says Länsförsäkringar's chief economist Alexandra Stråberg.

» Published: July 07 2025

Rising Inflation Delays Expected Interest Rate Cuts
Photo: Anna Tärnhuvud/SVD/TT

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Inflation for the past month was 2.9 percent. This can be compared to 2.3 percent in May, but above all - more than expected. From the market, an assessment had been made of an increase to 2.5 percent regarding the so-called KPIF measure, which the Swedish Central Bank relies on primarily.

We knew that inflation would rise, but it's a bit surprising that the outcome comes out so much higher than expected, says Mattias Persson, chief economist at Swedbank.

It went in the wrong direction and it's a bit worrying.

A quick figure

Today's figures from the Statistical Central Bureau (SCB) are the so-called "quick figures" that the SCB reports, and more detailed information will be provided next week.

Mattias Persson's assessment is that the increase may be due to so-called base effects, which occur when the SCB makes annual changes in the measurement.

His colleague, Alexandra Stråberg at Länsförsäkringar, is on the same line.

But it's a bit too high for that, she says, and notes that today's figure can give the Swedish Central Bank a headache in terms of how to act.

The Swedish Central Bank chose to lower the interest rate to 2.0 percent last time. The next monetary policy message will be delivered on August 20. The higher inflation figure than expected speaks against further cuts. For example, Robert Boije, chief economist at SBAB, believes that today's figure is likely to "ruin a cut in the interest rate in August".

At the same time, the Swedish economy is still moving slowly, which means that, for example, Swedbank still believes in an interest rate cut this year, currently in September.

I still think that another cut is needed and I do not rule out that it needs to be moved forward. We must also remember that Trump will present his tariffs this week, says Mattias Persson.

Great uncertainty

The uncertainty about what the outcome will be regarding the tariff talks, especially between the EU, Sweden, and the USA, is worrying, he notes. The notion that Trump will finally back down, which has created the expression "Taco", Trump Always Chickens Out, is not something Mattias Persson is so sure about anymore.

I think the uncertainty will increase this week. I think that people have been living in some kind of Taco coma and are afraid that now that Trump has gotten his budget through, he feels that he can drive the policy he wants.

Tobias Österberg/TT

Johanna Cederblad/TT

Fact: Inflation in June

TT

Inflation in June rose to 2.9 percent according to the KPIF measure, according to a preliminary calculation made by the Statistical Central Bureau (SCB). It can be compared to 2.3 percent in May. The increase was significantly larger than expected. Analysts had on average expected the KPIF inflation to rise to 2.5 percent.

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TTT
By TTEnglish edition by Sweden Herald, adapted for local and international readers

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