Swedens Slower Core Inflation Bolsters Case for Steady Key Rate

Sweden’s core inflation eased to 2.7% in September 2025, providing further support for the Riksbank’s decision to maintain a cautious stance on interest rate adjustments. The decline, which marks the third consecutive month of slowing inflation, aligns with the central bank’s projections and reinforces its view that borrowing costs can remain at a three-year low for now. This data point is critical for markets evaluating the trajectory of Swedish monetary policy and the broader Nordic economic outlook.

Inflation remains a central concern for central banks globally, particularly as economies navigate the transition from high inflationary pressures to more stable price levels. For Sweden, the Riksbank’s primary inflation measure, the CPIF, fell to 3.1% in September, down from 3.2% in August. The central bank’s target is 2%, and while the current rate is above that, the easing trend suggests that the path toward stability is taking shape. The core inflation rate, which excludes energy and food, is especially telling for policy decisions, as it removes short-term volatility and provides a clearer picture of underlying inflationary pressures.

Introduction

The CPIF (Consumer Price Index for the Final Consumer) is Sweden’s key inflation metric and a core indicator used by the Riksbank to guide monetary policy. It captures price changes for goods and services consumed by households and is widely followed by investors and analysts. The latest data suggests that inflationary pressures are moderating, offering policymakers more flexibility to avoid further rate hikes in the near term.

The Riksbank has cut key interest rates by 225 basis points since May 2024, making it one of the more aggressive central banks in Europe in its response to economic weakness. The September data supports the central bank’s current strategy of holding rates steady until late 2026, as outlined in its recent policy projections.

Data Overview and Context

The preliminary release from Statistics Sweden showed that the CPIF inflation rate excluding energy fell to 2.7% in September, down from 2.9% in August. This aligns with the Riksbank’s expectations and is in line with the median forecast of 2.8% in a Bloomberg survey. The headline CPIF rose to 3.1% from 3.2%, with the central bank targeting a long-term rate of 2%.

| Indicator | September 2025 | August 2025 | Riksbank Forecast | Median Forecast |
|-----------|----------------|-------------|-------------------|-----------------|
| CPIF (Headline) | 3.1% | 3.2% | N/A | N/A |
| CPIF Ex Energy | 2.7% | 2.9% | 2.7% | 2.8% |

The final September inflation figures are expected to be released on October 15, with a detailed breakdown of price changes across components. The data will help clarify whether the easing trend is broad-based or limited to specific sectors.

Analysis of Underlying Drivers and Implications

The easing core inflation reflects broader stabilization in consumer and business spending, as well as the impact of previous Riksbank rate cuts. Energy prices, which have been volatile in recent years, remain a key area of focus, although their influence on core inflation has diminished. The data suggests that the Riksbank’s accommodative stance is beginning to take effect, as lower borrowing costs support investment and consumption.

Looking ahead, the central bank will continue to monitor wage growth, housing costs, and external demand for Swedish goods and services. A key factor is the global economic slowdown, particularly in Germany and other major trading partners, which could affect domestic demand and inflationary pressures. If the current trend continues, the Riksbank may delay further rate hikes until early 2026, as currently forecasted.

For the broader economy, the slowdown in inflation supports the Riksbank’s goal of maintaining low and stable interest rates to support growth. A rate hike in 2025 is now seen as unlikely, with the first potential increase expected around the end of 2026.

Policy Implications for the Riksbank

The Riksbank has been guided by a data-dependent approach in its monetary policy decisions. The September inflation data supports its current stance of rate stability and reinforces its decision to avoid hiking rates until late 2026. The central bank’s focus is on ensuring that inflation returns to its 2% target without sacrificing economic momentum.

The Riksbank has also emphasized the importance of global economic conditions and the need for continued fiscal support from the government. With inflation easing and growth remaining fragile, the central bank is likely to maintain its accommodative stance for the foreseeable future.

Market Reactions and Investment Implications

The inflation data has reinforced expectations of a prolonged period of low