Riksbank expected to remain ‘on hold’ today – TDS

Strategists at TD Securities see the Riksbank keeping its monetary stance unchanged at today’s meeting.

Key Quotes

“We are in line with unanimous consensus in expecting the Riksbank to keep its policy rate unchanged today at -0.50%”.

“We also agree with what seems to be consensus in the analyst community for the Riksbank to push back its first rate hike from mid-2017 into 2018”.

“From there, the question is whether the Riksbank can say enough to support the dovish tone right now in Swedish markets, and we think that the answer is yes. The depreciation in SEK means that the Riksbank doesn’t need to be in any rush to ease further, and can sit back to see what the BoE and ECB are thinking and how the data unfolds”.

“But it will also be looking hard at the steep fall in global rates, and the fact that markets are pricing in easing from the BoE and ECB, knowing that if it appears to be too far behind the other European central banks in terms of dovishness, then markets could start pushing SEK higher instead, losing the boost to inflation that a weaker currency brings”.

“So we could see the Riksbank go as far as pushing the end-2016 repo rate forecast a couple of bps lower from the -0.53% reading in April, signalling a 50-50 chance of another -10bps rate cut. That should help to support the recent move higher in EURSEK, as it heads toward our year-end target of 10.0”.