Swedish Rate Wrap

While high electricity prices are currently squeezing Swedish households and reducing purchasing power, the broader economic recovery remains on track, and the Riksbank is expected to overlook this temporary data weakness.

Key Takeaways

• 1.The Swedish economic recovery remains fundamentally on track, supported by expansive policy rates and fiscal stimulus despite recent high electricity prices.
• 2.Recent surges in electricity prices (SEK 1.20/kWh average in Feb) are reducing household purchasing power but are viewed as a temporary obstacle rather than a structural threat.
• 3.The Riksbank is expected to maintain its current stance, interpreting data weakness from energy prices as temporary, while the market prices in a 50% probability of a rate cut by June.

Table of Contents

• A Swedish recovery is on track...
• ...but how certain can we be?
• Continued caution among households
• High electricity prices weigh on households
• The direct effect will not break households...
• ...but downside risks have increased somewhat
• Riksbank looks through potential near-term data weakness
• Research disclaimers

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