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 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 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.
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.
Norges Bank hikes and keeps guidance hawkish
The recent decision by Norges Bank to hike rates and maintain a hawkish guidance underscores a robust approach to inflation management. This aligns with the broader market expectations of continued monetary tightening throughout the region.