SBAB anticipates higher policy rate as a result of the closed Strait of Hormuz

The closed Strait of Hormuz in the Persian Gulf - an effect of the Iran war - may remain closed for a while, according to SBAB's chief economist Robert Boije. This is assumed to raise global inflationary pressure, among other things via higher energy and transport prices.

"We are now changing our forecast and introducing two increases in the key interest rate already before the end of the year," he says in a press release.

"An opening of the Strait of Hormuz in the near term appears (now) increasingly unlikely, which should result in a significant negative development for inflation," he adds as justification for the new forecast.

The two increases – from 1.75 to 2.25 percent in the policy rate – will probably come in November and December, according to Boije.

Before this forecast, SBAB's economists expected that the Riksbank would remain at 1.75 percent in the key interest rate for the rest of the year.

SEB's senior economist Robert Bergqvist also expects a higher policy rate. He describes the interest rate level of 1.75 percent as "probably somewhat expansive" at the same time that he is worried by all the consumption-oriented election promises from the Riksdag parties.

"We can move towards a situation where the Riksdag gives to households with one hand and the Riksbank takes back with the other. The monetary policy equation is becoming increasingly complex," he writes in a report.

The Riksbank's policy rate primarily affects short-term interest rates, such as variable mortgages.

The upward pressure on interest rates is also on mortgages with longer maturities, which are set based on what the banks have to pay when they borrow on the bond market.

The interest rate on a ten-year Swedish government bond – a benchmark in the market – has risen from 2.53 percent at the end of June to 2.89 percent. The ten-year interest rate in the USA has driven the development globally, with a lift from 4.37 to 4.68 percent during the same period.

The trend is also visible in the market's pricing of the Riksbank's key interest rate. An increase in the key interest rate to 2.00 percent this year is fully priced in by market players. And in the first half of 2027, the professionals expect two more increases, to 2.50 percent.

If the mortgage interest was raised by the same amount – 0.75 percentage points – a mortgage of three million kroner would be 1,875 kroner more expensive per month next year, if the effects of the interest deduction are disregarded.