- Riksbank: Expecting a scheduled tightening in July
- EURSEK: Oil price to hold back inflation
- EURNOK: Uncertainty to hold back the NOK
The global economic climate continues to be strong. We see evidence of this in the US where most macro data is exceeding market expectations. The recent harvest of data from China confirms a strong start to the year. The trend in global inflation is also positive. Previous monetary policy stimulus measures are feeding into the economy and contributing to the improvement that we are now seeing. This forms the basis of increasing long yields.
Inflation is partly driven by earlier energy price rises. The price of oil falling to USD 40/barrel by year-end represents a risk to our view of inflation and long yields. Despite this, we still believe that interest rates will continue to rise. We address this on page 3.
We revise our full-year crude oil price forecast from USD 60/bbl to USD 40/bbl. After six days of oil price declines, we believe it is clear the market has realised that activity gains among US shale producers will challenge this year's oil market balance. Over the last three months, shale has beaten our most optimistic scenario. OPEC has done what we expected it to do by cutting production, but it cannot continue intervene when shale producers counteract that cut in less than 12 months, particularly given that it took one year for OPEC to achieve agreement.