MNI BRIEF: Riksbank Hikes 25bps, Leaves Door Ajar To 25bp More

The Riskbank hiked 25 basis points, lifting the policy rate to 4.0%, at its September meeting and stated that it could hike further. (MNI RIKSBANK WATCH: 25bps Hike, Krona Poses Upside Risks)

The rate path accompanying the decision showed the policy rate rising very gradually and peaking at 4.1% and staying there until the second half of 2025 and then dipping to stand at 3.69% three years ahead, suggesting peak is now very close to peak, and, with the executive board's central scenario anticipating a prolonged period of flat rates, the so-called 'Table Mountain' approach, which is being adopted by advanced economy central banks.

The Riksbank, however, highlighted the uncertainy around the current outlook by publishing alternative rate scenarios. In one scenario, with policy reacting to higher than expected inflation, it assumed that the policy rate would be raised to between 0.5 and 1 percentage points above the forecast in the main scenario, leaving the door open to a policy peak closer to 5.0% than 4.O%.

In the updated Monetary Policy Report forecasts inflation on the target CPIF measure was shown fallling to 2.5% next year, up from the previous 2.4% forecast, and then dipping to an unchanged 1.8% in 2025.