RIKSBANK: Cautious 25bp Cut In December, Little Change In Rate Path At Long-end

The Riksbank has cut rates by 25bps as unanimously expected, but the guidance and rate path is more cautious than consensus. Highlights from the policy statement:

• Unchanged from November: “ If the outlook for inflation and economic activity remains unchanged, the policy rate may be cut once again during the first half of 2025”.
• This rhetoric has been used extensively by Exec board members: “Despite some signs that economic activity is on its way to recovery, it remains weak. A stronger economy is important in its own right, but it is also a necessary condition for inflation to stabilise close to the target”.
• Cautious signals ahead; “This argues for a more tentative approach when monetary policy is formulated going forward.”
• “The Riksbank will therefore carefully evaluate the need for future interest rate adjustments, in light of the effect of earlier cuts and shifts in the risk profile regarding the outlook for inflation and economic activity”.
• “There is particular uncertainty regarding developments abroad”

Cautious rate path in line with the guidance. Mechanical shift lower at the front-end at expected, but the end-point remains at 2.25% (the mid-point of the updated neutral range of 1.5 to 3.0%).