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ING analysts suggest that the Swedish central bank has caught markets by surprise by reiterating that rates will most likely rise later this year.

Key Quotes

“The Riksbank has said that rates will “most probably” rise to 0% in December. Probably the biggest takeaway from this is that it suggests a clear willingness to exit negative rates. The domestic and global economic backdrop has deteriorated significantly over the past few months, which suggests little impetus otherwise to increase interest rates.”

“We had expected the Riksbank to push back the timing of the next hike. The PMIs are now below the breakeven PMI level, while there are signs that the jobs market is slowing – albeit as the central bank emphasises, the latest labour data signalling a sharp spike in unemployment potentially contains quality issues.”

“All of this means the Riksbank is now signalling no additional rate hikes after December, compared to one previously.”

“Don’t forget that policymakers are much more relaxed about the risk of currency strength amid ongoing SEK weakness, which indicates the central bank will be in no hurry to follow in the footsteps of dovish central banks overseas.”