Riksbank to End Rate Pause as Inflation and Energy Costs Rise in Sweden

Sweden is facing rising inflation driven chiefly by soaring energy prices, prompting the Riksbank to prepare for renewed interest rate hikes later this year. After a period of maintaining lower rates, the Swedish central bank is poised to raise its key interest rate again likely in November or December 2026 due to increasing inflationary pressures.

The consumer price index (KPIF) inflation climbed to 1.5% in September 2026, up from the previous month. While inflation excluding energy prices (KPIF-XE) was much lower at 0.5%, the KPIF measured with constant taxes (KPIF-KS) was notably higher at 2.9%, highlighting energy costs as a main inflation driver. Historically, inflation peaked at 10.2% in December 2022 due to global supply disruptions and geopolitical tensions affecting energy prices, after which Riksbank aggressively raised rates to stabilize inflation near its 2% target.

Currently, the official policy rate is 1.75%, down from a peak of 4.0% in September 2023. Experts such as Swedbank economist Arturo Arques expect two 25 basis point hikes—one in November and another in February 2027—restarting the tightening cycle. These increases could add significant monthly costs for mortgage borrowers. For example, a 1 million SEK mortgage may become approximately 300 SEK more expensive monthly, and for a 3 million SEK loan, the annual cost could increase by over 10,000 SEK after tax deductions.

Households are cautioned to review their financial preparedness in light of these developments. Combined rising fuel, electricity prices, and mortgage rates may create a ‘perfect storm’ financially. Consumers are advised to maintain savings buffers and carefully consider mortgage planning amid increasing borrowing costs.

Inflation measurement has evolved since 2017 when Riksbank adopted KPIF for targeting inflation to better capture underlying inflation pressures by excluding distortions from housing interest rate changes. The central bank’s inflation target remains at 2%, within a tolerated variation range of 1-3%. The recent uptick, driven by energy prices, signals that monetary policy will likely tighten to maintain inflation stability.

Overall, the end of the Riksbank’s rate pause indicates a shift to address inflation resurgence, with direct impacts on household expenses expected in the coming months.