It's not too late to protect your business against Sweden’s rising interest rates
As Swedish interest rates continue their ascent, traders must prepare for potential impacts on the market. Per the full note from Nordea, the Riksbank's aggressive rate hikes—up 2.5% over the past year—signal a firm commitment to combat inflation, with expectations for further increases in February and April. In this environment, institutional traders should be looking at instruments that hedge against rising costs, particularly as market pricing suggests the policy rate could reach 3.5%. This creates a strategic opportunity to protect businesses against the rising interest rate backdrop.
What the desk is arguing
The desk posits that institutional traders must proactively hedge against rising interest rates in Sweden to maintain business viability. Per the analysis from Nordea, the Riksbank raised its policy rate significantly over the last year and plans to continue this trend, indicating a steadfast commitment to controlling inflation.
With the central bank expected to raise rates by an additional 0.25% in February 2023 and again in April, this signals a critical point for businesses relying on debt financing. The current policy rate has reached its highest level since the global financial crisis, with market forecasts suggesting an increase to 3.5% as inflation remains a formidable adversary.
Where it sits in our coverage
Our consensus target for the SEK/USD pair is 1.075, with a range between 1.04 and 1.12. Specifically, jpmorgan has set a target of 1.10 for March 26, while bofa is more cautious with a target of 1.04 over the same tenor.
This view aligns with the broader cross-firm consensus where traders expect ongoing volatility in response to the Riksbank's policy trajectory. Given the high stakes involved, the desk’s recommendation fits within the projected targets but might trend towards the upper end of the consensus range.
How other firms see it
Several firms, including jpmorgan, are aligned with the desk's perspective on the necessity for hedging given the prevailing interest rate environment. In contrast, bofa offers a more conservative stance, reflecting a divergent view on the future rate path.
Key indicators to watch include the trajectory of the SEK/USD pair amidst the Riksbank's decisions and the potential spillover effects on broader EUR/SEK dynamics as Eurozone conditions unfold, further influencing Sweden's inflation and rate outlook.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Swedish interest rates are on an upward trajectory, creating a need for effective hedging strategies.
- 02The Riksbank is expected to raise its policy rate further, with current rates pricing in a potential increase to 3.5%.
- 03Businesses need to consider protective measures against inflation-induced rate hikes.
- 04Market volatility is anticipated as central bank policies play out in the near term.
Market implications
Traders should closely monitor the SEK/USD pair, particularly as the Riksbank's next policy meetings approach. Furthermore, a shift above 1.075 could trigger additional hedging strategies among businesses born from rising costs.
Risks to this view
A dramatic shift in inflation, perhaps spurred by unexpected economic data or a proactive fiscal policy response, could lead to a reassessment of the Riksbank's rate hikes, invalidating the current hedging strategy.
Corporate insights It's not too late to protect your business against Sweden’s rising interest rates 31-01-2023 The increase in interest rates in Sweden over the past year has been significant, and the upward trend is likely to continue in the near term. There is a way to protect your business against rising interest costs. Nordea's corporate loan with an interest rate cap offers the benefits of a floating-rate loan and the protection of a fixed interest rate ceiling.
Interest rates in Sweden have been on a sharp upward trajectory, and there’s still a way to go as the Swedish Riksbank tries to tame inflation. Over the past year, the central bank has raised its policy rate by 2.50% points to the highest level since the global financial crisis. Variable mortgage rates have increased accordingly, and the Riksbank is not done yet, says Nordea Chief Strategist Henrik Unell . “The central bank has communicated that they intend to raise the policy rate by a further 0.25% point in February 2023, and it is quite likely that this will be followed up by 0.25% point in April,” he says.
The interest rate market is even more aggressive, pricing in that the Riksbank will eventually raise its policy rate to 3.50%. The development during December suggests that the market will be right, Unell adds. Henrik Unell, Nordea Chief Analyst Risks tilted towards higher interest rates Central banks have no other option than to act forcefully against inflation, according to Unell, given their mandate of ensuring price stability.
He explains that the disproportionate pandemic stimulus measures triggered inflation and the rise in interest rates. Deglobalisation and the war in Ukraine have added additional layers of complexity. There are currently no signs that inflation has started to fall, given the broad-based increase in prices of goods and services. “I expect that Swedish inflation will not remain sticky at two-digit levels for too long but will eventually cool off in the near future,” he says.
The real question is how quickly it will fall and where it will land, he adds. Unell argues that the inflation models central banks used in 2021-2022 were unreliable and gave a “false sense of security.” Nordea’s forecast for the Swedish and global economies for 2023 is “quite gloomy,” Unell notes. Central banks are likely to adjust their monetary policy to adapt to the worse economic development in 2024, but that’s only if inflation falls to 2%.
If price pressures persist, despite the weaker macroeconomic picture, interest rates will continue to stay elevated. When it comes to interest rates, Unell sees the risks as asymmetrical – tilted towards higher rates rather than lower rates. He argues that the anatomy of markets has changed fundamentally and the low-rate paradigm is “dead and buried.” Even if the pace of inflation were to edge lower to 2%, that does not mean a return to the 0% interest rate environment. “Private individuals and businesses should realise that the current inflation and interest rate story has more than one chapter, and the future is highly uncertain,” he says. “Arguments such as ‘floating rate loans are always best’ sound pretty hollow to me.” Arguments such as ‘floating rate loans are always best’ sound pretty hollow to me.
Henrik Unell, Nordea Chief Analyst Rebecca Sundkvist, Nordea Senior Analyst An insurance policy against higher interest rates One way for companies to guard against future rate increases while also benefiting from lower rates is through Nordea’s corporate loans with interest rate caps. They combine the benefits of a floating-rate loan with the security of a fixed-rate loan as the interest rate cost is capped at a certain level. Rebecca Sundkvist , a senior analyst in Nordea Markets, works with many corporate customers that have taken out loans with variable interest rates.
Historically, that’s been the most beneficial approach, but times have changed. “Every day we talk to customers who are worried as their variable interest costs continue to rise. They wonder if it’s too late to protect themselves against rising interest rates,” she says. Nordea’s corporate loans with an interest rate cap are a good option.
In practice, they function like a variable-rate loan, but with a cap limiting the interest rate at a maximum level. The borrower pays a premium for this protection, as with an insurance policy. The higher the cap rate, the lower the premium. “There is still a wide range of risks related to sustained high inflation and rising interest rates,” Sundkvist notes. “The Riksbank has communicated an alternative scenario: If inflation becomes persistent, we could see a policy rate of 4.50% in 2023.
So it’s not too late to protect yourself against rising interest rates.” It's not too late to protect your business against rising interest rates. Rebecca Sundkvist, Nordea Senior Analyst Emma Svenler, Nordea Analyst Emma Svenler , an analyst in Nordea Markets, notes that if you lock in your interest rate today, you can only check after the fact if it was a good decision or not. With a corporate loan with an interest rate cap, you don’t have to think about it.
You have protection against rising interest rates, and your interest costs will be lower if interest rates fall. “We have customers who chose to protect themselves against rising rates with an interest rate cap at the start of 2021. Today they’re thankful they did as they’ve already benefited from the cap,” Svenler says, adding: “Just as you would insure your home or your car against damage, think of an interest rate cap as an insurance policy, but against rising interest rates.” Want to know more? Find out more about Nordea’s corporate loans with interest rate caps here (in Swedish) .
You’re welcome to contact us for more information at your Nordea branch office or via email below. Contact us Corporate insights Insights Economy Share on Facebook Share on Threads Share on Linkedin 24-11-2025 Sustainability Nordic companies stick to climate goals despite global uncertainty Amid geopolitical tensions and fractured global cooperation, Nordic companies are not retreating from their climate ambitions. Our Equities ESG Research team’s annual review shows stronger commitments and measurable progress on emissions reductions.
Read more 20-11-2025 Sector insights RESourceEU in the age of geoeconomics: Nordic companies positioned to seize opportunities As Europe shifts towards strategic autonomy in critical resources, Nordic companies are uniquely positioned to lead. Learn how Nordic companies stand to gain in this new era of managed openness and resource security. Read more 20-11-2025 Open banking How APIs power the real-time payments revolution in banking The financial industry is right now in the middle of a paradigm shift as real-time payments become the norm rather than the exception.
At the heart of this transformation are banking APIs (application programming interfaces) that enable instant, secure and programmable money movement. Read more Scroll to top
Sources & References
How we cover this story