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MNI Riksbank Reveiew - Apr 22: Bar to 50bp hikes isn’t out of reach

The Riksbank hiked 25bp yesterday and slowed QE reinvestments for H2. On our calculations the Riksbank sees 100% probability of a 25bp hike under its base case and 100% probability of a 50bp hike under its alternatitve scenario.

  • The Riksbank hiked 25bp yesterday - markets had priced in around a 75% probability of a February hike but the only sellside analyst we had seen with a hike as a base case was Swedbank, although most acknowledged a risk of a hike.
  • Just as notable as the immediate changes in policy are the changes in the repo rate path. It is very rare historically for the Riksbank to assign anything in the path a 100% probability but based on our calculations, that is exactly what they have done this week. We estimate the Riksbank’s path is using a 100% probability of a June hike and 90% probabilities of hikes in September and November, with another two hikes next year.
  • However, the Riksbank also notes that “risk outlook for inflation is on the upside, however, particularly in the near term” and published an alternative scenario. Based on our calculation this alternative path sees a 100% probability of a 50bp hike in June and 2% rates by this time next year.

See the full document including summaries of 10 sellside reviews:

MNI Riksbank Review - 2022-04.pdf

189 words

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  • The Riksbank hiked 25bp yesterday - markets had priced in around a 75% probability of a February hike but the only sellside analyst we had seen with a hike as a base case was Swedbank, although most acknowledged a risk of a hike.
  • Just as notable as the immediate changes in policy are the changes in the repo rate path. It is very rare historically for the Riksbank to assign anything in the path a 100% probability but based on our calculations, that is exactly what they have done this week. We estimate the Riksbank’s path is using a 100% probability of a June hike and 90% probabilities of hikes in September and November, with another two hikes next year.
  • However, the Riksbank also notes that “risk outlook for inflation is on the upside, however, particularly in the near term” and published an alternative scenario. Based on our calculation this alternative path sees a 100% probability of a 50bp hike in June and 2% rates by this time next year.

See the full document including summaries of 10 sellside reviews:

MNI Riksbank Review - 2022-04.pdf