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Swedish Rate WrapHeadwinds mounting at the Riksbank

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As we know, bad news tends not to travel alone. The inflation surprise in January was followed by weaker unit labour costs and continued low wage growth. The market's conclusion is that a repo rate hike will not come until December at the earliest. In this edition of the Swedish Rate Wrap, we review what would have to happen for our forecast of a repo rate hike in September to materialise.

Overall, there is a substantial risk that the Riksbank will ultimately be forced to lower its repo rate path in conjunction with its meeting on April 25, and thus signal a repo rate hike later than in September. However, the fact that the Riksbank opted not to revise its repo rate path in February, despite a lower inflation forecast, indicates a certain willingness to start raising the repo rate.

Disclaimer

Claes Måhlén

Chief Strategist

Fixed Income

clma02@handelsbanken.se

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