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Riksbank: Unchanged policy rate, likely hike in December – Nordea

Mats Hydén, analyst at Nordea Markets, notes that Riksbank left the repo rate unchanged at -0.25% while the repo rate path implies a hike most likely in December and thereafter policy is implied to be on hold.

Key Quotes

“Today’s announcement was more hawkish than expected. The likelihood of a hike December was actually increased. This means that the Riksbank is not driven mainly by its forecasts and inflation outlook, but seems to have an inclination to move the rate one more time upwards despite slowing economy and falling inflation expectations. Thus, it seems very likely that the repo rate will be increased in December. A longer comment on this will follow.”

“Repo rate: unchanged @ -0.25% as expected”

“Rate path: Revised”

“QE: No change. 45 bn will be bought between July 2019 and December 2020 (40 bn nominals and 5 bn linkers)”

“Macro forecasts: Growth in 2020 (cal. adj) was lowered from 1.3% y/y to 1.0%y/y (our forecast is 1.0%). Unemployment rate in 2020 assumed to be 6.9% (up from 6.7%, our forecast is 7.1%)”

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