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The Riksbank’s July meeting is starting to loom large (July 3), and analysts at Nordea Markets expect the central bank to leave the repo rate path unchanged.

Key Quotes

“The Riksbank is probably more worried about protectionism than market participants in general, but it’s not clear how this impacts monetary policy. For instance, heightened uncertainty and weaker activity point in the dovish direction, while supply cutbacks and tariff’s effects on inflation point in the hawkish direction.”

“The external pressure on the Riksbank to lift rates is building, as the media coverage is highly critical of the Riksbank- and for the opposite reason compared to a few years ago. The Riksbank had “done nothing right” in 2014.”

“Changing medial winds is one reason we choose to play the Riksbank hawkishly in the near term. If the Riksbank leaves the rate path unchanged as we expect, the passage of time will also act as a magnet on Swedish rates, pulling them higher as the implied hike comes close.”