29 Apr 2015
Riksbank refrains from cutting rates, tops up QE programme – ING
FXStreet (Barcelona) - Petr Krpata of ING, previews the Riksbank policy decision, and further notes that the central bank kept repo rates steady but topped up its QE programme by an addition SEK 40-50bn, just enough to prevent a massive SEK rally.
Key Quotes
“In line with our expectations, the Riksbank refrained from cutting the repo rate, yet topped up the QE programme (by additional SEK 40-50bn). Repo rate path was lowered, while GDP growth and CPI forecasts for 2015 and 2016 were upgraded.”
“No rate cuts but the top up of QE is in line with our view that things have improved (SEK not overly strong, CPI inflation looking to have bottomed).”
“Overall, good well balanced measures/statement. Despite undershooting overly dovish market expectations, it looks to be enough to prevent a material SEK strength (EUR/SEK broke below the 9.30 level, yet the slide was not too excessive – as was for example was NOK strength after the surprising Norges Bank decision not to lower rates back in March).”
“The SEK 40-50bn QE (of bond purchases) is spanned over 5 months (from May to Sept), which translates into SEK 8-10bn of purchase per month. This is a somewhat lower number than our estimate of SEK 10-13 bn per month needed to match the ECB QE (based on the estimate of the overall SEK 200-250bn needed to match the ECB balance sheet expansion over the 19-motth time horizon).”
“Further easing measures (rate cuts, QE, loans to companies, FX interventions) cannot be ruled out and will be a direct function of SEK strength. We would expect the Riksbank to ease the policy further should SEK strengthen more rapidly.”
“We reiterate our base line EUR/SEK forecast of 9.30 over 1-3 month, with EUR/SEK moving within a wide trading range of 9.10-9.50 (with EUR/SEK moves towards the 9.00/10 levels likely to be met by further easing measures).”
Key Quotes
“In line with our expectations, the Riksbank refrained from cutting the repo rate, yet topped up the QE programme (by additional SEK 40-50bn). Repo rate path was lowered, while GDP growth and CPI forecasts for 2015 and 2016 were upgraded.”
“No rate cuts but the top up of QE is in line with our view that things have improved (SEK not overly strong, CPI inflation looking to have bottomed).”
“Overall, good well balanced measures/statement. Despite undershooting overly dovish market expectations, it looks to be enough to prevent a material SEK strength (EUR/SEK broke below the 9.30 level, yet the slide was not too excessive – as was for example was NOK strength after the surprising Norges Bank decision not to lower rates back in March).”
“The SEK 40-50bn QE (of bond purchases) is spanned over 5 months (from May to Sept), which translates into SEK 8-10bn of purchase per month. This is a somewhat lower number than our estimate of SEK 10-13 bn per month needed to match the ECB QE (based on the estimate of the overall SEK 200-250bn needed to match the ECB balance sheet expansion over the 19-motth time horizon).”
“Further easing measures (rate cuts, QE, loans to companies, FX interventions) cannot be ruled out and will be a direct function of SEK strength. We would expect the Riksbank to ease the policy further should SEK strengthen more rapidly.”
“We reiterate our base line EUR/SEK forecast of 9.30 over 1-3 month, with EUR/SEK moving within a wide trading range of 9.10-9.50 (with EUR/SEK moves towards the 9.00/10 levels likely to be met by further easing measures).”