Yesterday the Riksbank raised the policy rate by 25 basis points to 2 percent. Today the preliminary inflation figures for October were released. They were soft. Very soft.

CPIF came in at 1.1 percent (down from 1.5 percent in September).
CPIF excluding energy (CPIF-XE) came in at 0.1 percent (down from 0.5 percent).

The market had expected roughly 1.4 percent on CPIF and around 0.5 percent on the underlying measure. The Riksbank’s own September forecast was higher still, looking for 1.7 percent on the headline. This is a clear downside miss.

What the Riksbank said yesterday

In the press release they argued that a stronger economic outlook combined with cost increases from supply disruptions (the war in the Middle East) means inflation is expected to rise ahead. They pointed out that CPIF is still being held down by temporary fiscal measures and that underlying inflation (after stripping out both energy and those temporary tax cuts) had been closer to 1.6–3 percent. That is why they hiked, and why they signalled that further increases are likely over the coming year if the outlook holds.

It sounds reasonable on paper. The problem is that the actual underlying number that arrived today is 0.1 percent. Not 1.6. Not 3. 0.1.

The lag of monetary policy

Everyone knows monetary policy works with a delay. Roughly 12 months is the rule of thumb, sometimes longer. The hike that takes effect in November will not show up in the inflation figures until toward the end of 2027. What the Riksbank is doing now therefore has almost no impact on the numbers we will see over the next several months. They are hiking on a forecast about the future while the actual underlying inflation right now is close to zero.

This is precisely the kind of proactive hawkishness that has been hard to defend when outcomes repeatedly come in softer than the forecasts.

Risk of deflation?

No, not seriously. That needs to be said clearly.

Energy prices remain volatile and can still move higher. The fuel tax is set to rise again in December. The temporary cut in food VAT will eventually expire. The krona has weakened over the course of the year, which creates some imported inflation. Global supply disruptions have not disappeared. All of this argues against a genuine deflationary spiral.

But there is another risk that is more realistic: that Sweden ends up with inflation that is too low for too long, below the target, at the same time as the Riksbank has already begun raising rates. CPIF-XE at 0.1 percent is not deflation, but it is extremely low. If the underlying trend persists – and if the temporary fiscal drag fades more slowly than the Riksbank assumes – we could see inflation undershooting 2 percent for longer than they expect, just as the rate hikes start to bite.

That is not deflation. It is an undershoot. And for a central bank whose target is 2 percent, that is already a problem.

Conclusion

Today’s figures strengthen the view that has been around for some time: the Riksbank, under Erik Thedéen, tends to be too confident in its forecasts of rising inflation and too quick to hike while the actual underlying price pressure is still weak. They raise rates on risks and assumptions, not on the data we have. When those data come in this soft, it becomes difficult to claim the timing was right.

The final October figure arrives on 12 November. The December meeting (with a new forecast) will be interesting. If October was not a one-off, the Riksbank will need to explain why it hiked when underlying inflation stood at 0.1 percent.

This is one reason we moved from 100 percent dividends to a 70/30 allocation. When a central bank raises rates on forecasts while the realized underlying number is 0.1 percent, we keep less of the growth capital in the jurisdiction that has to live with the decision.

Today’s figures and yesterday’s decision are on the 2026 economic calendar.

For now the criticism stands: they are too hawkish, too early, and too reluctant to treat the temporary factors for what they are.