Riksbank preview: Low inflation limits hawkish scope
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https://think.ing.com/articles/riksbank-preview-low-inflation-limits-hawkish-scope/
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4 itemsRiksbank’s unconvincing hawkish attempt
The Riksbank's recent meeting points to a central bank struggling to maintain its hawkish front while facing persistent low inflation. Although the Riksbank held rates steady at 1.75% and hinted at tighter monetary policy for the future, their new inflation forecasts contradict the appetites for a rate hike in 2026, raising doubts among market participants. Per the full note from ing-think, the updated outlook shows inflation remaining below the 2.0% target until 2027, undercutting any immediate rate hike expectations. The desk sees this divergence as reflective of a broader sentiment that is cautious on the Swedish krona, anticipating continued weakness over the near term.
Riksbank 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.