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A dovish 100bp hike

RIKSBANK
  • The first four words of the Riksbank press release say it all: "Inflation is too high." The Riksbank announced a 100bp hike today with their policy rate forecast looking for a further 50bp hike in November and a final 25bp hike in February to 2.50% (with a 10% hike of a further 25bp hike after that).
  • Analysts and MNI had been expecting a 75bp hike in September, with the majority also looking for a further 75bp hike in November. Consensus was split between whether there would be further hikes in 2023. So overall, this is more front loaded than expected, but over the next couple of meetings, the policy rate is moving to where analysts had expected. Of course, following today's hike there is now a much higher upside risk to the policy rate decisions in the future.
  • The forecasts see CPIF peaking at 10.8% in January/February 2023 before falling back sharply to the target by September 2023 and falling to a trough of 0.37% in February 2024. CPIF ex energy is expected to peak at 7.75% in December 2022 and fall back much more slowly to target - but move back to 3% by October 2023 and to around 2% in late 2024.
  • Asset purchases will continue in Q4 as previously announced (most had expected a reduction in Q4) but will likely cease from Q1.
  • So overall this is a dovish 100bp hike - and EURSEK is back to its prevailing levels ahead of the decision.
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