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Markets Take Dovish Read on Riksbank

RIKSBANK

The Riksbank hikes rates by 50bps to 3.50%, as expected. Full policy statement here: https://www.riksbank.se/en-gb/press-and-published/...

Statement highlights:

  • Inflation is still far too high and underlying inflation has been much higher than expected
  • The policy rate will probably be raised further by 0.25 percentage points in June or September
  • The krona has not been a decisive factor behind the substantial rise in inflation, but it has contributed to somewhat higher inflation
  • A stronger krona would be desirable in this situation.

New policy rate forecasts:

  • Q1 2023: 2.75% (Prev. 2.75%)
  • Q2 2023: 3.32% (Prev. 3.21%)
  • Q2 2024: 3.65% (Prev. 3.33%)
  • Q2 2025: 3.65% (Prev. 3.33%)
  • Q2 2026: 3.35%

Markets taking a distinctly dovish read for the decision - with EUR/SEK rallying to touch 11.3744. The disclosed rate path from the bank falls short of analyst expectations for the peak rate to near 4%, with the 2024 forecast the highest rate of the cycle at an average of 3.65%, up from 3.33% previously, but short of expectations.

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