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Minutes: Single-month Inflation Readings Downplayed

RIKSBANK
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Interestingly, several members stressed that individual monthly inflation outcomes were not key determinants of the direction of monetary policy (e.g. Thedeen: “if CPIF inflation overshoots or undershoots the target by one or a couple of tenths of a percentage point in individual months, this should not in itself affect our plans for conducting monetary policy”).

  • We read this as an attempt to temper market expectations for future rate cuts following soft individual inflation readings. A reminder that the May cut was supported because March inflation (the sole reading between the March and May Riksbank meetings) undershot the Riksbank’s forecasts significantly.
  • As such, it provides support to our assessment that today’s inflation reading (which was a touch below consensus forecasts) does not change the picture much re: a possible June cut, given we will receive another inflation reading before the June meeting and the Riksbank’s guidance suggests the bar to cut in consecutive meetings is already quite high.
  • Finally, Breman and Bunge affirmed that the Riksbank’s analysis into the long-run size of the balance sheet will come later this year.
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Interestingly, several members stressed that individual monthly inflation outcomes were not key determinants of the direction of monetary policy (e.g. Thedeen: “if CPIF inflation overshoots or undershoots the target by one or a couple of tenths of a percentage point in individual months, this should not in itself affect our plans for conducting monetary policy”).

  • We read this as an attempt to temper market expectations for future rate cuts following soft individual inflation readings. A reminder that the May cut was supported because March inflation (the sole reading between the March and May Riksbank meetings) undershot the Riksbank’s forecasts significantly.
  • As such, it provides support to our assessment that today’s inflation reading (which was a touch below consensus forecasts) does not change the picture much re: a possible June cut, given we will receive another inflation reading before the June meeting and the Riksbank’s guidance suggests the bar to cut in consecutive meetings is already quite high.
  • Finally, Breman and Bunge affirmed that the Riksbank’s analysis into the long-run size of the balance sheet will come later this year.