Riksbank’s unconvincing hawkish attempt
The Riksbank's recent meeting points to a central bank struggling to maintain its hawkish front while facing persistent low inflation. Although the Riksbank held rates steady at 1.75% and hinted at tighter monetary policy for the future, their new inflation forecasts contradict the appetites for a rate hike in 2026, raising doubts among market participants. Per the full note from ing-think, the updated outlook shows inflation remaining below the 2.0% target until 2027, undercutting any immediate rate hike expectations. The desk sees this divergence as reflective of a broader sentiment that is cautious on the Swedish krona, anticipating continued weakness over the near term.
What the desk is arguing
The Riksbank's decision to maintain rates while delivering a hawkish tone appears more rhetorical than substantive, with market expectations for a 2026 rate hike now seeming too optimistic. The Riksbank's projections show core inflation remaining below 2.0% until at least early 2027, undermining the premise for any hikes this year. Per the full note from ing-think, inflation is expected to hover under 1.0% in the second half of this year.
These macroeconomic indicators suggest that the Riksbank is trapped, attempting to sound hawkish without the necessary economic backdrop to support it. The market's skepticism is further illustrated by only planning for rate hikes in a high inflation scenario that requires high energy prices—arguably an unlikely scenario in the current climate.
Where it sits in our coverage
The desk adopts a cautious stance on the Swedish krona, reflecting our analysis that does not anticipate rate hikes this year. Current consensus targets for the SEK/USD pair indicate a range around 1.075, with some divergence in expectations:
This call aligns with jpmorgan's higher expectations while contrasting with bofa's more bearish outlook, positioning the desk at the upper bound of the spread.
How other firms see it
Aligned firms, such as jpmorgan, maintain a more optimistic view for the krona, forecasting a stronger performance based on potential future inflationary developments. In contrast, bofa holds a markedly lower target, reflecting a belief in persistent economic weakness and a lack of impetus for the Riksbank to hike rates soon.
The outlook for the EUR/SEK exchange rate remains particularly relevant as it echoes underlying sentiments regarding the Riksbank's position. Furthermore, investor focus on broader regional inflation trends will be key as markets digest the implications of Riksbank's projections.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Riksbank maintains rates at 1.75% while implying hawkishness.
- 02New inflation forecasts indicate persistent low inflation through 2027.
- 03Market skepticism around rate hikes may weigh on the SEK.
- 04Expectations for rate hikes have diminished post-Riksbank meeting.
Market implications
Traders should watch closely for the EUR/SEK pair as it may respond adversely to Riksbank's dovish projections. Additionally, keep an eye on inflation data releases to gauge shifts in market sentiment regarding future Riksbank policy.
Risks to this view
Should inflation unexpectedly surge due to external shocks, such as rising energy prices, this could prompt the Riksbank to initiate rate hikes sooner than projected, invalidating the current cautious outlook. Likewise, an abrupt policy signaling shift from the Riksbank could also reverse market positioning.
Older quick take Quick take 10:55 Sweden Riksbank’s unconvincing hawkish attempt Sweden’s central bank tried to sound more hawkish as it held rates today, but new inflation and rate projections are at odds with market bets on a 2026 hike. Inflation is low and expected to remain below target until 2027, and we therefore stick to our call of no hikes by the Riksbank this year. Still, we aren’t turning negative on the krona The Riksbank building in Stockholm Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Francesco Pesole FX Strategist The Riksbank decision today was fully in line with our expectations .
A hold at 1.75% was accompanied by policymakers trying to sound hawkish, likely hoping to preserve tightening expectations as an inflation-expectation hedge. Markets were unconvinced, though, as – predictably – the updated projections sat uneasily with the statement’s claim that the probability of a hike in 2026 has increased. The Riksbank shifted focus from the headline CPIF – which has been heavily dampened by a food VAT cut – to a more core measure, which strips out energy and temporary fiscal measures.
That is likely to prevent markets from reading the headline CPIF forecast as too dovish, given it’s expected to remain below 1.0% between July and December. The central bank published estimates for this new measure under three scenarios: main, high inflation, low inflation. As shown below, the new core CPIF measure shows a smoother upward trend projection in the main scenario, but is still expected to remain below the 2.0% target until 1Q27: simply too low to hike.
And that is mirrored by rate projections, which have been moderately revised higher but don’t fully discount a rate hike until mid-2027. A 4Q26 rate hike priced in by the market before the meeting is only included in the high inflation alternative scenario, which probably requires a return to high energy prices. New Riksbank's inflation and rate projections Source: Riksbank, ING "> Source: Riksbank, ING The reaction was therefore understandably dovish-leaning by the market, with front-end swap rates and the krona edging lower.
From a rates perspective, we still see downside potential at the front-end of the SEK curve, as markets still have plenty of room to price out a rate hike by year-end that we don’t think will materialise. We are instead neutral on EUR/SEK short-term as we see the wider rate differential being offset by lower energy prices and a stronger growth outlook for Sweden relative to the eurozone. In 2H, we still expect EUR/SEK to fall to 10.70.
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