Riksbank to leave its policy rate on hold - TDS

Markets are unanimously expecting the Riksbank to leave its policy rate on hold today, and are also widely expecting the Riksbank to remove the easing bias from its policy rate forecast, taking out the last 3bps of rate cuts, notes the research team at TDS.

Key quotes

“This is in line with our own expectations, and we think that this outcome is more than priced in already. However, we think that the Riksbank is going to be careful to avoid leaving a hawkish tone overall, especially given the fact that EURSEK is sitting nearly 20 big figures lower compared to one week ago.”

“In the press release, we look for the Riksbank to emphasise that it still has a full easing toolkit at its disposal if required, including further rate cuts, more QE, and FX intervention, something that we expect Governor Ingves to reiterate in the press conference. Given widespread expectations for the Riksbank to drop its easing bias and the substantial recent move lower in EURSEK, we think that risk/reward favours looking for EURSEK to end the day higher. It’s difficult to envision what the Riksbank is likely to do that would be more hawkish than what markets are already anticipating, and the Riksbank continues to be a central bank that is very fearful of unwarranted or overly rapid currency appreciation so will want to downplay the marginal shift higher in the policy rate profile.”