Riksbank Policy Outlook
Nordea expects the Riksbank to keep its policy rate unchanged at 1.75% next week. The bank also expects a wait-and-see approach in the near term. The war in the Middle East and higher energy prices are expected to add around 0.5 percentage points to headline CPIF inflation in the near term. This effect is described as not drastic so far and starting from a low base. The article notes that uncertainty remains high. It also states the piece was produced using an AI tool and reviewed by an editor. Looking back to early 2025, we recall a period when stubbornly low inflation kept the Riksbank on the sidelines with its policy rate at 1.75%. Core inflation was expected to fall further, and the main risk was an energy price shock from geopolitical tensions. The dominant view was that the next move in rates would be a cut.Market Positioning Implications
The situation has now changed significantly, creating new opportunities. This week’s CPIF data for February 2026 showed a jump to 2.4%, well above the 2.0% target and surprising a market that expected 2.1%. This is a stark contrast to the low inflationary pressures we saw throughout 2025. After cutting the policy rate twice in late 2025 to its current 1.25%, the Riksbank is now in a difficult position. Markets are now pricing in at least one rate hike by summer, a sharp reversal from just a few months ago. This pivot is causing considerable movement in Swedish assets. This has caused the Krona to strengthen, with the EUR/SEK pair dropping from 11.50 to near 11.25 over the past two weeks. We are seeing a significant pickup in demand for SEK call options, pushing one-month implied volatility up from around 7% to over 9% as traders position for more currency strength. This suggests buying options to bet on a stronger Krona could be profitable. In the rates market, the most direct play is to position for higher policy rates. Traders should consider paying fixed on 2-year Swedish interest rate swaps, as the market reprices the forward path for STIBOR higher. This is a bet that the central bank will have to follow through with the hikes the market now expects. The prospect of tighter monetary policy is also creating headwinds for Swedish stocks. We believe buying put options on the OMX Stockholm 30 index provides an effective hedge against a market downturn. This strategy would protect portfolios if the Riksbank signals a more aggressive hiking cycle than anticipated at its next meeting. Create your live VT Markets account and start trading now.
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