Riksbank: Stubbornly hawkish – TD Securities

According to analysts at TD Securities, the Riksbank came in more hawkish than expected today, saying that “as before, the interest rate is expected to be raised towards the end of the year or at the beginning of next year.”

Key Quotes

“So its near-term policy rate forecasts were left little changed, though the policy rate forecasts are significantly flatter further out, with the repo rate forecast to be 0.37% three years forward, compared to 0.90% previously.”

“However, markets seem to be unconvinced that the Riksbank is going to actually go through with a rate hike anytime soon, with analyst comments so far sounding quite sceptical, the SEK rally remaining contained, and rates markets still pricing in some easing over the next year. We would concur, and think that the Riksbank will have to turn much more dovish at some point, and would look for that turn at the next meeting in late-October.”

“Looking at the details of the Riksbank’s MPR, they downgraded GDP growth for 2019 and 2020, though upgraded a touch in 2021, and CPIF was edged just a tenth lower in both 2020 and 2021.”

“Putting all of these developments together, we believe that the October meeting will see the Riksbank finally throwing in the towel on near-term rate hikes, and pushing them out for another year or so.”