Fast Comment Sweden - Macro Research - Handelsbanken Capital Markets


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Fast Comment SwedenPreview of Riksbank monetary policy decision

  1. The Riksbank to revise its policy rate forecast
  2. Expect changes in the wording on the krona
  3. The Riksbank likely to hold off raising the policy rate until December
The Riksbank to revise its policy rate forecast
Neither we nor anyone else expect the Riksbank to change the repo rate in tomorrow's monetary policy announcement. In contrast, the consensus unanimously sees a change in the Riksbank's repo rate forecast. We expect this revision of the rate path to be rather small, given that recent inflation outcome disappointments are at least partly offset by a weakening krona. This depreciation will of course add to inflation over the coming year. All told, we expect the new repo rate forecast to signal a hike in the fourth rather than the third quarter, as has been the case in Riksbank forecasts over the past year.
Expect changes in the wording on the krona
The krona is much weaker than the Riksbank forecast. In fact, the deviation is the largest recorded in quite a number of years. We expect this will have implications for tomorrow's press release and overall message. The long-standing wording "important that the krona does not appreciate too quickly" will likely be left largely untouched as long as a majority of the Riksbank's Executive Board remain unconvinced about the underlying inflation and the re-anchoring of inflation expectations. However, we expect this cautious wording on the krona to be wrapped in new wording that moderates the tone, e.g. by acknowledging that some of the recent depreciation might be temporary and that a substantial bounce-back could be on the cards.
The Riksbank will hold off raising the policy rate until December
Ultimately, we expect the Riksbank to hike the repo rate at its December meeting. We forecast a gradual rise in underlying inflation, but boosted by the weak krona and high energy prices, CPIF inflation will remain close to the inflation target throughout 2018.


Johan Löf

Senior Economist


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