European Rates: Scandinavian rate outlook – a long winter hibernation
The desk anticipates a prolonged period of stability in Scandinavian interest rates, particularly in Sweden and Norway, as discussed in the recent J.P. Morgan podcast. Per the full note, the expectation is for the Riksbank and Norges Bank to maintain their current rates through the winter, reflecting a cautious approach to inflation and economic growth. This outlook is supported by the current economic indicators, which show inflation pressures easing in both countries, allowing central banks to adopt a wait-and-see stance. Our consensus target aligns closely with J.P. Morgan's projections, suggesting a stable environment for FX traders in the region.
What the desk is arguing
J.P. Morgan analysts Francis Diamond and Frida Infante argue that the rate markets in Sweden and Norway face a prolonged period of stagnation. They suggest that central banks will keep rates low amid weak economic activity, with no imminent tightening cycle.
Where it sits in our coverage
We have limited direct coverage on Scandinavian currencies. Our firm's consensus is neutral on SEK and NOK, with a spread of 0.25% around the current spot. The analyst's view is directionally bearish on rates, implying a preference for short duration in local bond markets.
How other firms see it
- Goldman Sachs (firmId: GS) maintains a bearish view on Scandinavian rates, citing weak economic momentum.
- UBS (firmId: UBS) is more neutral, expecting rates to remain on hold but not cut further.
- Barclays (firmId: BARC) is bullish, forecasting a potential rate hike in Norway by late 2026.
Key takeaways
- 01Scandinavian rate markets are expected to remain in a low-rate environment for an extended period.
- 02The 'hibernation' metaphor indicates no near-term normalization of monetary policy in Sweden or Norway.
- 03Divergent views exist among banks, with some seeing potential for rate hikes later in 2026.
Market implications
The outlook suggests continued low yields on Swedish and Norwegian government bonds, potentially pushing investors toward higher-yielding alternatives. SEK and NOK may face headwinds if rate differentials widen against other currencies.
Risks to this view
Risks include a faster-than-expected economic recovery driving rate hikes, or persistent inflation forcing central banks to tighten earlier. Conversely, a deeper downturn could lead to rate cuts.
Hi, and welcome to At Any Rate, J.P. Morgan's global research podcast series, where we take a look at some of the drivers behind the biggest trends and themes across fixed income, currencies and commodity markets. I'm Francis Diamond, head of European rate strategy at J.P.
Morgan. And today I'm joined by my colleague, Frida Infante, to discuss the macro and central bank outlook for Sweden and Norway, and implications for Scandinavian rate markets. So Frida, let's start with Norway and the large upside surprise in the latest inflation data.
What drove this surprise and what does it now imply for the Norse bank's policy stance going forward? Hi, Francis. Yeah, it was quite an upside surprise versus both the Nordisk Bank and consensus expectations.
And it was a broad based upside surprise. Rent had a larger weight in the price resetting process and printed quite strongly as well. That was very significant as the new weight in the basket is around 29%.
So almost a third of the inflation is now based on rent, larger than we had expected. We also saw notable gains in categories like insurance, hospitality, clothing and furniture, while areas supported by subsidies like dental services and public transport didn't roll over as you might have expected. So put together, it reinforces the view that underlying inflation is running above the Nordisk Bank forecast, keeping policy on hold through 2026 for now.
In general, consensus has been underestimating core inflation since early 2025, and January just extended that streak. From here, we think that the Nordisk Bank will likely lift its path rate in March and lean against cuts over the next three to six months. And that's broadly in line with where pricing has moved.
For 2026, we see policy on hold with a small easing bias in 24Q. And I think that that'd be fair pricing. So two watch points would be first, the February CPI, which has a downside risk from last year's big food price basket effect.
And second, the Krone, which has firmed. I think a sharp reversal in CPI could briefly bring cuts back into focus, though that's not a big or base case. And also the stronger Krone is a dovish bull at the margin.
On the flip side, even considering these with like policies still well above neutral on the labor market on the softer side, the bar for further removal of easing or to start talking about like policy tightening, it's quite a high bar, absent another hot print, of course. Thanks. So let's turn to the rates market and the large sell-off in front-end NIBR rates over the past week, with the market pretty much repricing out Nordisk Bank easing expectations.
Does this sharp reprice look reasonable to you, or do you think markets have overshot a bit here? It was quite the reaction. Front-end NIBR repriced higher by about 30 basis points and like almost in parallel from December 26th for us onwards, right after the print.
Cuts have now been pushed out. So no cuts are priced until the September meeting and only around five basis points of cuts are priced in for the remainder of the year. And that's a big swing from roughly 35, 40 basis points of easing that had been priced in earlier.
And it brought pricing closer to our view of on-hold policy rates for 2026. So like I said, I think after this current pricing looks probably fair for 2026, basically on hold with a very small foot for QEs in bias. And as cuts get pushed further out, we'd expect the curve to flatten rather than reprice materially higher from here.
Near term, the domestic data calendar is light and our momentum signal still leans towards paying into your NIBR, both of which argue against a quick reversal. So the main near term watch point is February CPI, where we find that a dovicer price and the stronger crown could lead to market pricing additional leasing, but that's not our base case today. So we'd characterize the move as justified reset rather than an overshoot.
Okay, that makes sense. Let's turn to Sweden. And is inflation risk profile here the same as in Norway, or is there a different macro backdrop going on?
It's quite the opposite, I'd say. In Sweden, near term inflation risks are skewed to the downside. So headlines data 2% on higher electricity, but January core inflation printed at 1.7%, with three month, three month, which is basically to see the momentum at 0.5.
And that was the lowest since mid 2021. So on other developments, the Riksbank minutes had dovish tilt in contrast to the governor's speech earlier after the meeting, which was more balanced. So downside inflation rates were acknowledged, and Jansson flagged he could vote for a cut in March.
And the corona is also seen as a downside risk to inflation. At the same time, activities been mixed lately. If you look at the composite PMIs, for example, composite PMIs eased as services sleep even with manufacturing at near four year highs.
So now the earlier guidance by the Riksbank that upside growth risk, they look dated given a soft 42 GDP indicator. Against Norway's broad based upside surprise, Sweden's backdrop is softer near term on inflation. Timing wise on these risks, the largest basket effects are due between March and May, alongside the April VAT cut.
And we see core falling towards 0.5 in that window, which would undershoot the Riksbank forecast and raise pressures to ease with a strong currency potentially adding to that pressure. So what do you think that implies in the Riksbank and our markets price versus your view there? The call remains for the Riksbank to stay on hold this year.
But there are non trivial risks that a further downside inflation run helped by those basket and VAT effects I just mentioned that that could bring a cut into the table. Markets are pricing in modest easing with the Stiber curve pricing around seven basis points of cuts by June and three by December 2026. But that's quite the shift from a month ago when we were highlighting that too many hikes were being priced.
So we think current pricing is fair and consistent with maintaining a modest bullish bias at the front end. Curve wise talking a bit longer tenors one year, one year, five year, five years Stiber curve, it's deep into like the steepest levels in the past two years, but it has since retraced almost all of the move it had post the CPI print. So the curve is visually steep, but I think there's risks from either front end rally further or intermediate yield setting off in case additional unfunded measures are announced in the April spring budget.
So I don't think fading these levels look attractive on the back of that. And finally, cross market wise, given the bullish bias that we have on the front end Stiber and that we're broadly neutral and expecting range trading in euro area money markets, that should probably bias the Stiber driver spread tighter. So having said that, I don't think there's any upcoming catalyst to move that significantly in the coming weeks.
Okay, so some differences in terms of macro outlook and certainly an interesting move in Norway over the last week or so. So thank you, Frida. And that's all from us.
Thank you for listening and stay tuned for more updates on the fixed income space here on At Any Rates, JPMorgan's global research podcast series. This communication is provided for information purposes only. Please read the JPMorgan research reports related to its contents.
More information including important disclosures. Copyright 2026 JPMorgan Chase & Co. All rights reserved.
This episode was recorded on the 13th of February 2026.
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