Brown Brothers Harriman’s (BBH) Elias Haddad expects the Riksbank to keep its policy rate at 1.75% for a seventh consecutive meeting while leaving the door open to a later hike as inflation runs above projections.
However, with inflation still well below target, he sees a high bar for hawkish repricing, leaving Swedish Krona (SEK) facing a policy headwind
High bar for hawkish repricing “The Riksbank is widely expected to keep the policy rate at 1.75% for a 7th consecutive meeting (Thursday). Importantly, the Riksbank will likely keep the door open for a rate hike later this year because inflation is tracking above its projection.” “In July, Sweden CPIF was 0.7% y/y vs. Riksbank’s forecast of 0.5%, while CPIF ex-energy was 0.6% y/y vs.
Riksbank forecast of 0.2%.” “Nonetheless, with inflation still well below the 2% target, the bar for a hawkish Riksbank repricing is high which is a headwind for SEK. The swaps curve continues to fully price in a 25bps hike to 2.00% in December.” Author