Swedish Economy Surges Beyond Expectations in Q3 2025, Raising Interest Rate Concerns
Sweden's economy grew 2.4% in Q3 2025, surpassing expectations and raising prospects of earlier interest rate hikes amid concerns of overly expansive fiscal and monetary policies.
- • Swedish economy grew 2.4% in Q3 2025, exceeding the 1.6% forecast.
- • Recovery accelerated post-summer with a notable rise in consumer spending in August.
- • Fiscal and monetary policies may be too expansive given the stronger economic data.
- • Risk of earlier interest rate hikes by the Riksbank raised by leading economists.
Key details
The Swedish economy grew by an impressive 2.4% in the third quarter of 2025 compared to the same period last year, significantly surpassing analysts' forecast of 1.6%, according to new data from Statistics Sweden (SCB) reported by multiple sources including HD, Resume, and TN (121477, 121472, 121464). The recovery accelerated notably after the summer, particularly in August, driven by increased consumer spending.
Additionally, Sweden's GDP grew by 1.1% compared to the previous quarter, exceeding the forecasted 0.7% growth (120687, 121467). This stronger-than-anticipated economic performance has led economists to reassess fiscal and monetary policy strategies. Danske Bank's chief economist, Susanne Spector, pointed out that the current policies, including the autumn budget and recent interest rate cuts by the Riksbank, were based on assumptions that no longer align with the robust data. She cautioned that these expansive policies might promote an overheating economy, potentially prompting an interest rate hike sooner than anticipated, possibly sometime next year (121477, 121472, 121464).
Nordea's chief analyst Torbjörn Isaksson shares Spector’s concern about a possible earlier rate increase but regards the risk as relatively slight. He also suggested the September rate cut by the Riksbank may have been unnecessary given the strong economic indicators (121472). This consensus indicates that while further rate cuts are unlikely, Sweden could face rising interest rates as policymakers respond to the unexpectedly vigorous growth.
Overall, the sharp upward revision in Sweden’s economic activity and consumer spending has injected optimism about continued expansion into 2026 but raises caution regarding the timing and pace of monetary tightening to avoid inflationary pressures.