The policy rate in Sweden does not need to be raised as much as in other countries if prices surge as a result of the energy price shock from the war in Iran, according to Torbjörn Hållö. He believes that the Swedish Central Bank can refrain from one or two interest rate increases compared with the European Central Bank (ECB).
Real wages fell
This is largely because the parties in the Swedish labor market base their contract negotiations on the Swedish Central Bank's two percent inflation target, even though prices for food, rent, interest, gasoline and other items are rising much faster, according to Hållö.
We are not chasing short-term gains but long-term good real wages. It is important that the Swedish Central Bank is clear that it understands this.
He points to the inflation shock of 2022–2023 as an example. There, wage earners took a real hit - with declines of around nine percent in real wages when inflation was at its worst.
Real wages are calculated by subtracting inflation from nominal wage increases. Before the war in Iran broke out in February, real wages were estimated to return to 2021 levels only in 2027 or 2028.
That timeline may need to be pushed further out if, as a result of the energy price shock and other disturbances, there is a new inflationary shock while wage agreements continue to be based on the inflation target.
Long-term cost-benefit calculation
Hållö emphasizes that the union's strategy to always stick to the inflation target of two percent is not about sacrificing employees, but about "a long-term cost-benefit calculation."
We believe that this is what will provide the best real wage increases for our union members over time.
Real wages have increased by an average of 1.4 percent per year since the industrial agreement began to be used as a marker for wage increases in collective bargaining in the 1990s. Between 1997 and 2025, real wages rose by a total of 52 percent, according to the Swedish Mediation Institute and LO.
Contract negotiations in 2026 are practically non-existent, apart from a few agreements in the aviation sector and for players in the top women's football leagues, according to the Swedish Mediation Institute. Most contracts from last year were two-year contracts, with an annual salary increase rate of 3.0 percent from April 1, 2026.
But 2027 will be a big agreement year, with nearly 500 out of a total of 617 agreements up for renegotiation between unions and employers.
Source: Swedish Mediation Institute
