Danske Bank analysts suggest that following the 24 October monetary policy announcement of Riksbank, we got the impression that a December hike was as close to a done deal as one could possibly get, but the minutes give a somewhat different impression.
Key Quotes
“Here are a few takeaways.
- Arguments for hiking the policy rate to zero in December are generally quite thin. The impression is rather that it ‘feels as the right thing to do’ given that policy is likely to be on hold for a long time thereafter. It is worth noting that there is no discussion of ‘reversal rates’, i.e. negative bi-effects of negative rates outweighing the advantages.
- Zero is not a floor. Several members point to the possibility that the policy rate could be lowered back to -0.25% if economic data warrants. Indeed, Stefan Ingves mentioned that today’s decision (we take it including sending a signal of a hike) gives the Riksbank scope for manoeuvre.
- A December hike remains probable (we usually do not quantify probabilities but 75% seems reasonable to us) but it is not written in stone. Per Jansson remains sceptical about a hike in the first place and (at least) Cecilia Skingsley and Martin Flodén could flip if data (macro/inflation/inflation expectations) turn out badly.
- No one at the board of governors sees a strong case for a protracted hiking cycle after a probable December hike.”
Share
