As the Swedish economy is seen growing, the Riksbank has revised up GDP forecasts to around 3.5% for 2016. The refugee influx gives a fiscal boost to the economy in the coming years, as the number of people employed in relation to the population at its records high. According to the NIER, the resource utilisation will be higher than normal.

Wages are likely to increase as the economy faces a tight labour market situation. No significant increase is seen in current wage demand as it is in line with previous pay line. Thus, markets expect rise in wage growth only due to higher wage drift.

The Riksbank options might get exhausted, as it faces challenges regarding the credibility of the inflation target. The repo rate is at -0.35% and can't be lowered further. Downward pressure on the already low interest rates is difficult to be justified by the Riksbank since the economy growth is strong.

"A rate cut can't be excluded as it may be necessary to make FX interventions more efficient and perhaps less controversial from a political viewpoint" - Nordea Research