Sweden Core Inflation Cools to Six-Month Low, Trimming Near-Term Hike Odds

What happened

Sweden's core inflation gauge - CPIF excluding energy - cooled to its softest pace in six months at 0.1% year over year in October, a preliminary print from Statistics Sweden showed. That undershot both the Riksbank's latest 0.6% projection and the 0.5% median from Bloomberg's analyst survey.

Headline CPIF also moderated, landing at 1.1% from 1.5% in September. Statistics Sweden will publish the full October breakdown on Nov. 12.

Markets and the policy backdrop

The krona, labeled the weakest performer this year among G-10 currencies, ticked lower on the release, down 0.3% to 10.9690 per euro at 9:02 a.m. in Stockholm. In rates, traders pared back tightening bets, with overnight swaps now pointing to roughly 0.06 percentage point of additional hikes in December and 0.37 by March, compared with about 0.11 and 0.41, respectively, a day earlier.

Coming a day after the Riksbank lifted borrowing costs for the first time since 2023, the report arrived in the wake of earlier moves by bigger central banks, including the European Central Bank. The central bank noted Sweden had the lowest annual inflation rate in the EU in September, but said rising energy costs and a strengthening economy suggest inflation will increase in the months ahead. Its message: "If the outlook for inflation and economic activity holds, it is likely that the policy rate will be raised further in the coming year."

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What pros are saying

Nordea Bank Abp's Torbjörn Isaksson flagged unexpectedly weak prices in services and "other goods," pointing to a broad slowdown. He wrote that the outcome supports Nordea's view that the Riksbank will hold in December and then lift the policy rate to 2.25% in February. "The numbers underline that inflationary pressures have been, and still are, modest in the Swedish economy," he said, adding the figure "doesn't alter the view that inflation will rise going forward."

According to Bloomberg Economics' Sweden economist Selva Bahar Baziki, CPIF is set to hit the Riksbank's 2% goal in December and "stay above it on average in 2027." DNB Carnegie senior economist Oddmund Berg said "the underlying cost pressures that the Riksbank refer to are still expected to increase inflation going forward, even though the current development is weaker than expected." He called the release "a solid argument for the Riksbank to wait until the first quarter for a next rate hike, taking the policy rate to 2.25%, and stick with our call for a hike in March 2027."

Why it matters for your portfolio

A softer core read took some heat out of near-term hike expectations, while the krona's dip keeps currency swings in play for Sweden-exposed assets. The central bank still signals more tightening if its outlook holds, and Bloomberg Economics sees inflation hitting target by December. The bottom line: watch Nov. 12 for the detailed print and track how swaps pricing evolves into the December meeting.

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