Riksbank Raises Rate to 2%, Expects Inflation to Exceed Target Next Year
Key Facts
Sweden’s central bank, the Riksbank, raised its policy rate by 0.25 percentage point to 2% in a decision issued on November 4, 2026, effective November 11. The bank said stronger economic activity, higher costs from supply disruptions and a weaker krona this year would push CPIF inflation and underlying inflation above 2% next year. The decision follows a hold in September, when the bank forecast the start of gradual increases near year-end. It added that another increase next year appears likely if the paths for inflation and activity remain in line with its forecasts. The Riksbank said the common thread among these indicators is the prospect of renewed price pressures despite moderate September readings for some measures.
September data show a mixed picture of prices. CPIF inflation, which excludes the effect of interest-rate changes on housing costs, was 1.5%, in line with the Riksbank’s latest forecast. But the bank said excluding the direct effects of temporary fiscal measures raises the CPIF reading to 3%. The measure excluding energy prices, which the bank described as currently the closest proxy for underlying inflation, was 1.6%, slightly below expectations. The result was a relatively low headline reading alongside a higher estimate when the effect of temporary measures is excluded, while the measure excluding energy remained below 2%.
The bank based its forecast for next year on three factors: stronger economic activity, higher costs related to supply disruptions and a weaker krona during the year. The Riksbank said these factors are expected to lift both CPIF inflation and underlying inflation above 2% next year. Its statement said, "CPIF inflation and underlying inflation will rise above 2% next year." This estimate links the rate increase to the expected path of prices, rather than September’s reading alone. The bank said it expects another increase next year if its activity and inflation forecasts materialise.
Preliminary indicators pointed to increases in GDP and employment in the third quarter, in line with the bank’s forecasts. In October, household confidence fell while business confidence rose again. The Riksbank said economic conditions are expected to continue improving and become normal during next year. Confidence data reveal a divergence between households and businesses, while growth in GDP and employment supported the bank’s assessment of activity. In September, the bank had forecast gradual rate increases near year-end before implementing the current increase.
Risks to inflation and activity remain on both sides, according to the Riksbank. The bank said the causes of supply disruptions remain in place and activity could grow faster than expected, adding to price pressures. On the other hand, it pointed to risks from weaker global demand due to geopolitical uncertainty, concerns about investment in artificial intelligence and weak public finances in some countries. This balance ties the monetary-policy outlook to developments in activity and prices in the period ahead. The November update did not include new rate forecasts.
The Riksbank’s September forecast put the average policy rate at 2.07% in the first quarter of 2027 and 2.24% in the second quarter, along a gradual path of increases. Those figures are from the September forecast, while the bank said the November update includes no new estimates. Minutes of its executive board meeting are due to be published on November 10, offering details of the decision’s discussion. The next monetary policy report, which will include new forecasts, is scheduled for publication on December 16, 2026. Until then, the September forecast remains the latest published numerical path for the policy rate.