The Riksbank left policy unchanged today, keeping interest rates at -0.5%, notes the analysis team at ING.
Key Quotes
“The interest rate forecast and policy statement signalled a somewhat later hike is likely, removing the chance of a hike at the next meeting in October.”
“The statement says that rates will increase “by 0.25 percentage points either in December or February”. This is at odds with the interest rate forecast, which indicates no probablilty of a December hike, and less than a 100% probability of a February hike.”
“The policy statement also makes clear that the Riksbank sees risks skewed to the downside, arguing that dealing with excessively low inflation is more difficult that addressing too high inflation. That suggests they are more likely to opt for February than December.”
“The forecast for core inflation – the key to the Riksbank’s policy stance – was also revised down to show 1.7% core inflation in December.”
“Two MPC members voted against the change in policy.”
“Our view remains that the Riksbank is unlikely to raise interest rates in December. While the probability of a hike in February is reasonably high given the explicit commitment to hiking at one of two meetings (which is more precise than previous policy statements), the Riksbank’s history of delaying hikes again and again means we still see further delays until later in 2019.”
“We thus see the probability of a February hike below 50%, in contrast to the latest Riksbank communication.”
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