ING’s Francesco Pesole expects the Riksbank to keep rates on hold through 2026 despite inflation falling temporarily to around 1%. The bank argues stronger Swedish growth and pre-emptive easing reduce the need for further cuts, and sees current market pricing for additional easing being unwound, which should lend support to SEK even if carry remains relatively low.

No further cuts expected in 2026

"A direct consequence of stronger growth is that it limits the chances of another Riksbank cut. CPIF inflation is likely to decelerate further in 2026 – in our estimate, to a 1.0% bottom in 3Q26 – but that’s heavily driven by VAT cuts and in line with the Riksbank projections, which also exclude further rate cuts. We agree with the Riksbank’s assessment that inflation will return close to 2.0% in 2027 and Governor Eric Thedeen’s view has remained neutral on rates."

"However, the latest downward surprises in inflation and a dovish comment by Riksbank member Per Jansson have prompted some speculation on another rate cut. Markets are pricing in around 15bp of easing by June, which we expect to be unwound and to offer some support to SEK."

"Even so, SEK’s sub‑2% yields will still place it toward the bottom of the G10 carry spectrum. Historically, however, SEK has shown only a loose relationship with short‑term rate differentials, given the dominance of cross‑border savings flows. Between 2015 and 2017, for example, EUR-SEK two‑year swap spreads were often at today’s levels or wider, yet EUR/SEK traded largely between 9.00 and 10.00. We therefore think stable rate differentials may slow, but not reverse, SEK appreciation."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)