Aino Bunge: How can AI influence the economy and monetary policy?

Erik Thedéen: Monetary policy challenges in war related supply shocks

The desk posits that the ongoing war-related supply shocks are complicating monetary policy decisions, particularly for the Sveriges Riksbank. Per the full note [source], Governor Erik Thedéen highlighted the difficulties central banks face in navigating inflationary pressures exacerbated by geopolitical tensions. This aligns with our view that the Riksbank may need to adopt a more cautious approach to interest rate adjustments, especially as inflation remains stubbornly high. With consensus targets for EUR/SEK reflecting a range of 1.04 to 1.10, the market is keenly watching for any shifts in policy direction that could impact currency valuations.

Riksbank likely to hold but hawkish risks are growing

The desk posits that while the Riksbank is likely to maintain its current policy stance, there are growing hawkish risks that could lead to a shift in expectations. According to ING Economics, the bank may be more inclined towards tightening as inflationary pressures persist and economic indicators signal resilience in the Swedish economy. The ongoing debate about rate hikes within the Riksbank highlights potential shifts in fiscal policy, particularly as market participants closely monitor CPI data and global economic trends. Per the full note [source], these dynamics may prompt traders to reassess their positions in anticipation of a more aggressive policy approach, even if no immediate changes are expected.

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Riksbank likely to hold but hawkish risks are growing

The desk anticipates that the Riksbank will maintain its current interest rate on May 7, while acknowledging a growing risk of a hawkish shift in tone. Per the full note from ing-think, the potential for a rate hike in 2026 hinges on sustained high energy prices and further tightening from the European Central Bank (ECB). This backdrop suggests a cautious approach from the Riksbank, yet the market may need to prepare for a more aggressive stance if inflationary pressures persist. Our analysis aligns with the downward trajectory for EUR/SEK into year-end, reflecting a broader sentiment in the FX market.