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Danske Bank analysts point out that the Riksbank (RB) has delivered on its ‘promise’ to hike to zero, probably one of the most expected moves ever.

Key Quotes

“The new rate path going forward is identical to the one in October, meaning an unchanged rate at zero through Q1 22. The end point (Q4 22) is at 13bp (unchanged).. Two board members, Jansson and Breman, voted against.”

“Compared with other forecasters, the RB, though acknowledging that growth is slowing, has a positive tone regarding both the global and Swedish growth outlook.”

“The wage forecast remains aggressive and in our minds unrealistic – see chart next page. This could cause problems for the RB later on.”

“We don’t have a big problem with the hike as such but we find it problematic that the RB really fails to present a comprehensive motive, especially since it expects inflation to remain on the low side of 2% throughout the forecast horizon. Potential negative side effects on monetary policy are discussed briefly. We think that a reason for moving to zero is to mitigate the risk of negative deposit rates on households’ deposits.”