Sweden’s inflation rate YoY has decelerated sharply to 0.30% in December 2025, down from 0.90% in November and well below the 12-month average of approximately 0.85%. This marks the lowest inflation reading since July 2025 (0.70%) and reflects a cooling price environment amid easing supply-side pressures and subdued demand. The decline contrasts with the prior upward trend seen in September 2025 when inflation peaked at 1.10%.

Drivers this month

• Energy prices stabilized after volatile summer months, contributing -0.15 percentage points (pp) to the slowdown.
• Food inflation eased, subtracting roughly 0.10 pp from headline inflation.
• Core services inflation remained sticky but showed signs of moderation, adding 0.05 pp.

Policy pulse

The current inflation rate of 0.30% sits well below the Riksbank’s 2% target, signaling diminished inflationary pressures. This may reduce urgency for further monetary tightening, potentially shifting the policy stance toward a more accommodative or neutral bias in the near term.

Market lens

Immediate reaction: The SEK weakened modestly against the EUR and USD following the print, reflecting market expectations of a slower pace of rate hikes. Swedish 2-year government bond yields fell by approximately 10 basis points within the first hour, while breakeven inflation rates declined, signaling reduced inflation risk premia.

Examining core macroeconomic indicators alongside inflation provides a fuller picture of Sweden’s economic health. GDP growth has moderated to an estimated 1.20% annualized rate in Q4 2025, down from 1.80% in Q3. Unemployment remains low at 5.10%, but wage growth has slowed to 2.00% YoY, consistent with easing inflation pressures.

Monetary Policy & Financial Conditions

The Riksbank has maintained a cautious approach, with the policy rate steady at 1.75% since October 2025. Financial conditions have tightened modestly due to global rate hikes but remain accommodative domestically. The recent inflation print may prompt the central bank to pause further hikes, balancing growth risks against inflation control.

Fiscal Policy & Government Budget

Sweden’s fiscal stance remains moderately expansionary, with a budget deficit forecasted at 0.80% of GDP for 2025. Government spending on social programs and infrastructure continues to support demand, but fiscal discipline is expected to tighten in 2026 to avoid overheating.

External Shocks & Geopolitical Risks

Global supply chain normalization and easing commodity price shocks have contributed to the inflation slowdown. However, geopolitical tensions in Eastern Europe and energy market volatility remain downside risks that could disrupt inflation dynamics.

Drivers this month

• Energy prices: -0.15 pp contribution to inflation decline
• Food prices: -0.10 pp contribution
• Core services: 0.05 pp, stable but slowing

Policy pulse

The inflation print is well below the Riksbank’s 2% target, suggesting less pressure on monetary policy to tighten further. The central bank may adopt a wait-and-see approach in upcoming meetings.

Market lens

Immediate reaction: Swedish krona (SEK) depreciated by 0.30% against the euro, while 2-year government bond yields dropped 10 basis points. Inflation-linked bonds saw reduced breakeven inflation rates, reflecting diminished inflation expectations.

Looking ahead, Sweden’s inflation trajectory will depend on several factors, including monetary policy decisions, fiscal discipline, and external shocks. We outline three scenarios with associated probabilities:

Bullish Scenario (20% probability)

• Inflation stabilizes around 0.50%–1.00% YoY as demand recovers moderately.
• Riksbank maintains current rates, supporting steady growth.
• Global commodity prices remain stable, limiting cost-push inflation.

Base Scenario (60% probability)

• Inflation remains subdued near current levels (0.30%–0.60%).
• Monetary policy stays on hold, with cautious monitoring of inflation signals.
• Fiscal policy tightens slightly to prevent overheating.

Bearish Scenario (20% probability)

• External shocks (energy price spikes, geopolitical tensions) push inflation above 1.50%.
• Riksbank resumes rate hikes to counter inflationary pressures.
• Financial markets experience volatility, with SEK strengthening on hawkish signals.

Overall, the balance of risks leans toward continued low inflation, but vigilance is warranted given global uncertainties.

Sweden’s inflation rate YoY has slowed sharply to 0.30% in December 2025, marking a significant easing from recent months. This trend reflects a combination of stabilized energy prices, easing food inflation, and moderated wage growth. The Riksbank faces less pressure to tighten monetary policy aggressively, potentially shifting toward a more neutral stance. However, external risks and fiscal policy adjustments remain key variables to watch. Financial markets have responded with modest SEK weakness and lower bond yields, signaling investor confidence in subdued inflation risks.

In the medium term, maintaining inflation near the 2% target will require careful calibration of policy tools amid evolving global conditions. The data from the Sigmanomics database underscore the importance of monitoring both domestic and external drivers to anticipate inflation dynamics accurately.

Key Markets Likely to React to Inflation Rate YoY

Sweden’s inflation data typically influence currency, bond, and equity markets sensitive to interest rate expectations and economic growth prospects. The following tradable symbols historically track inflation trends closely and are likely to react to this latest print:

• USDEUR – The EUR/USD pair often moves inversely to inflation surprises in Sweden due to monetary policy spillovers in the Eurozone.
• OMXS30 – Sweden’s benchmark equity index reacts to inflation data through shifts in corporate earnings outlook and interest rate expectations.
• SEKUSD – The Swedish krona’s exchange rate against the USD is highly sensitive to inflation-driven monetary policy changes.
• BTCUSD – Bitcoin often acts as an inflation hedge, with price movements reflecting inflation expectations globally.
• NASDAQ – The US tech-heavy index is indirectly affected by global inflation trends impacting risk sentiment and capital flows.

FAQ

What does the latest Sweden inflation rate YoY indicate?

The 0.30% inflation rate signals a significant slowdown, suggesting easing price pressures and less urgency for monetary tightening.

How does inflation affect Sweden’s monetary policy?

Lower inflation reduces the need for rate hikes by the Riksbank, potentially leading to a pause or slower pace of tightening.

What are the risks to Sweden’s inflation outlook?

Risks include energy price volatility, geopolitical tensions, and fiscal policy shifts that could reignite inflation pressures.

Key takeaway: Sweden’s inflation slowdown to 0.30% YoY marks a pivotal moment, easing monetary policy pressures but requiring vigilance amid external uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.