The announcement came as part of the agency's new investment plan for 2018-2029. In the plan, the agency envisages spending SEK 622.5 billion in developing and maintaining Sweden's rail and road infrastructure.
The agency's director-general Lena Erixon said during the announcement on Thursday that building less ambitious high-speed links made more sense.
"We consider that if one builds in stages, it is important to make sure that we can immediately benefit from the investments we make," she said. "If we build for higher speed, we would not be able to make use of it during the build-out period."
Instead, stretches of 250km/h rail will be developed over the next decade between Stockholm and Malmö, Stockholm and Gothenburg, Järna and Linköping, and Hässleholm and Lund, with Linköping-Tranås-Borås likely to follow.
These will cut more than an hour from the journey between Malmö and Stockholm and roughly half an hour from the journey between Stockholm and Gothenburg.
Jessica Rosencrantz, transport spokesperson for the opposition Moderates, said that the decision represented a victory for her party.
"For a long time, the government has promised high-speed rail services for 230 billion [SEK]," she said. "We have warned that the money is not available and instead want to expand the railroad where most needed, and we have said that 250 km/h represents the most value for money."
"What the traffic agency now proposes is precisely what the Moderates have pushed for," Rosencrantz said.
But HG Wessberg, a member of the committee tasked by the Ministry of Enterprise and Innovation with pushing for the high-speed links, said faster links would have been possible using different financing.
"If you only build at the rate that you have money available, that means one must build in stages, which becomes more expensive because it means building with various provisionary solutions. That's why we're recommending alternative financing," Wessberg said.
The new transport plan also includes a new coastal railway link between Umeå and Skellefteå, four tracks on the route between Uppsala and Stockholm, and plans to fully digitalise the system, with a new signalling system to be installed across the rail network.
The plan will see the agency invest SEK 333.5 billion in developing the transport system, with the rest of the funds going to maintenance and running costs.
This represents a SEK 100 billion increase on the previous plan, which ran from 2014-2025.