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Vad säger Riksbankens räntebana
att Frasare i fronten skall ligga?
Givet dagens fixingspreadar
It’s worth going back to yesterday’s US inflation reading in connection with oil price developments. The direct impact on headline CPI from gasoline was actually a bit weaker than expected but more lies ahead. While the core inflation measure excludes energy (and food) this does not mean that effects of declining oil prices will be non-existent. In fact, the chart indicates significant second-round effects on core inflation from changes in the oil price with a time lag of up to 12 months (as energy prices affect transport service costs etc). For the Fed this means that the outlook for rising core inflation has deteriorated and the risk of inflation undershooting the Fed’s target in the medium term has increased since the September meeting.
Oilprices feeding into core cpi
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Swedish September CPI is another shock for the Riksbank, which is in the process of preparing the October monetary policy report (released in conjunction with the rate decision on Oct 28). Inflation as measured by CPIF landed 0.36 percentage points below the Riksbank’s forecast, the biggest downside deviation since October 2013. As the Riksbank has signaled zero tolerance for downside surprised in inflation, the board will have no choice but to respond with lowering rates at the October meeting. Adding to the case for a rate cut is the fact that the ECB has been more active since the Riksbank’s September meeting and that the outlook for the global economy has weakened. Some board members seem reluctant to move all the way to zero with the repo rate. We think there is good reason to cut by a full 25bp as this would send a stronger signal that the Riksbank is ready to do what it takes to boost inflation. Currently, the important transmission mechanism is the SEK and a smaller cut risks being a disappointment and hence the effect on the SEK may be limited or non-existent. The size is dependent on how comfortable board members are with going all the way to zero. With Karolina Ekholm - the prime advocate of lower rates - no longer with the board, there is probably a slightly bigger probability of the Riksbank stopping at 5bp, i.e. in line with the ECB. The Riksbank – like the ECB – will remind markets that there are other tools in the toolbox if needed to counter lower-than-expected inflation. However, we expect no announcement of extraordinary policy measures in October.