MNI REVIEW: Riksbank Signals Dec Rate Hike And Flat After That

By David Robinson

     LONDON (MNI) - The Riksbank said on Thursday that it had left the repo rate

unchanged at -0.25% and altered its guidance to signal a December rate hike

followed by a prolonged pause.

     It had previously said a hike was expected late this year or early next and

had left a gently upwardly sloping rate path in place.

     Following are key points from the Riksbank announcement and its Monetary

Policy Report (MPR), its mix of economic analysis and projections.

     --The Riksbank announcement is a clear signal of a policy of 'one hike and

done'.

     Before the announcement, analysts were divided over whether the Riksbank

would leave its guidance in place for a hike late this year or early next, or

shift back the timing of the next hike, or remove it entirely. Instead, it took

a similar line to the Norges Bank, backing near-term tightening followed by an

expected prolonged policy pause.

     "The forecast for the repo rate has ... been revised downwards and

indicates that the interest rate will be unchanged for a prolonged period after

the expected rise in December," the Riksbank board stated.

     --MNI estimates the Riksbank executive board's collective rate path places

a 70% chance on a 25-basis-point December rate hike and a 100% chance on 25

points of tightening by February.

     The Riksbank's forecast showed the repo rate rising only very slowly to

0.13% by Q4 2022.

     --The MPR highlighted the uncertainty over both domestic and international

activity and inflation prospects.

     Swedish inflation on the target CPIF measure was forecast to rise from 1.7%

in 2019 to 1.8% in 2020, 1.8% in 2021 and to reach the 2.0% target in 2022.

     --The Swedish GDP outlook was cut throughout the forecast period. It was

lowered to 1.3% for 2019 from 1.5%, to 1.2% for 2020 from 1.5%, and to 1.6% for

2021 from 1.9%.

     --The unemployment numbers, which have been volatile, were forecast to show

a modest rise. The projection was raised to 6.8% from 6.6% for 2019, to 6.9%

from 6.7% for 2020, and to 7.0% for 2021 from 6.8%.

     All of these forecasts assume unemployment would be markedly below some

eye-catching recent headline numbers, including a spike to 7.6%.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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