Riksbank governor: On track for cutting interest rates in Sweden
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Economy Riksbank governor: On track for cutting interest rates in Sweden 10-04-2024 Interest rate cuts appear to be on the horizon in Sweden. But when and how quickly will they come? One of the country's top monetary policymakers, Riksbank Governor Erik Thedéen, shared his insigh
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4 itemsRiksbank preview: Low inflation limits hawkish scope
The desk anticipates that the Riksbank will maintain a wait-and-see approach due to persistently low inflation, which limits the central bank's capacity to adopt a hawkish stance. Per the full note from ing-think, while a unanimous hold is expected on June 17, Riksbank Governor Erik Thedeen may still signal a cautious posture regarding future rate hikes. Inflation figures remain subdued, with headline CPIF at 1.5% and core CPIF at just 0.5%, compelling the Riksbank to prioritize stability over aggressive tightening, despite market pricing suggesting a 23 basis points increase by year-end. Risks to the Swedish Krona (SEK) could stem from any overt hawkish signals that may emerge in the accompanying statements or projections, which are unlikely to meet heightened expectations suggested by market curve pricing.
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.
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