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Swedish Rate Wrap

Swedish Rate Wrap — Inflation once again under 2 percent

Nothing lasts forever! After a period when inflation exceeded the Riksbank's target, inflation will once again be under 2 percent in October. This development was expected, but is still a headache for the Riksbank. Having read the minutes of the October meeting, we stand by our view that bond purchases will not be extended after year-end. To reduce the risk of a strengthening krona, we think that the Riksbank will find other, more dovish actions, via the repo rate path and by commencing reinvestments for future maturities during 2018.

Covered bonds in SEK continue to struggle. This is especially so given the performance of equivalent bonds in EUR. We argue that the spreads will tighten in the future.

Andreas Skogelid, Strategist |

Swedish Rate Wrap — The elephant in the room forces the Riksbank to wait longer

Decisions during the week from both the Riksbank and the ECB provided plenty of food for thought. From the Riksbank's perspective, it is mainly the ECB that is a problem. The ECB's QE programme will continue until at least September 2018, and most likely longer. This increases the likelihood of the Riksbank extending its own QE into 2018. Our main scenario is that the Riksbank will decide to postpone its interest rate path and will signal a later increase than is currently being indicated. Our view is that the Riksbank will finally increase its key rate in September 2018. 

Andreas Skogelid, Strategist |

Swedish Rate Wrap — Global tailwind provides fuel for bond yields

The global economy is moving from recovery to economic boom. Despite risks of a setback, the risk scenario is now considered to be lower than at the beginning of the year. This provides fuel for rising inflation and thereby a normalisation of global monetary policy. In turn, it creates an environment for long yields to increase.

Andreas Skogelid, Strategist |

Swedish Rate Wrap — Dovish approach from the Riksbank

The decision of the General Council of the Riksbank to extend Stefan Ingves' mandate as Governor by five years and First Deputy Governor Kerstin af Jochnick's mandate by six years, increases the probability that monetary policy will be highly expansive for a long time to come. We review the consequences of this decision in terms of our roadmap for the Riksbank.

Andreas Skogelid, Strategist |

Sweden Comment — Preview of August inflation

  1. No further rise in August, but the inflation rate remains elevated after spikes in recent months
  2. Plenty of tricky components in August, but the infamous package tour prices should be well-behaved this time
  3. Robust underlying inflation to move the Riksbank's policy sooner than it says, we argue

Johan Löf, Senior Economist |

Swedish Rate Wrap — The Riksbank’s route to normality

Inflation during the summer was significantly higher than the targeted 2 percent. While inflation is currently affected by changes in methods that are providing positive impulses, underlying inflationary pressure is also on an upward trend. As the Riksbank's September meeting approaches, external factors also appear to be providing some impetus. Despite this, we anticipate a "wait-and-see" meeting. However, later this autumn, we expect that the Riksbank will need to start changing course. We are setting a roadmap for a rate increase.

Andreas Skogelid, Strategist |