MNI Riksbank Preview - April 2021: Three questions to ponder

There are three main questions for us ahead of the Riksbank's latest Monetary Policy Report.

1. Will asset asset purchases be front-loaded (again)? For both Q1 and Q2, asset purchases have been front-loaded and there is some expectation that asset purchases could be front-loaded again in Q3 (albeit to a smaller extent than previously). Sell side analysts are split between expecting purchases of around SEK72bln for both Q3 and Q4 and seeing a SEK80bln/SEK65bln split. Furthermore, last year there was a slowdown in QE purchases through July that we may see this year, so if this is seen again this year, the weekly purchase pace in the "normal" months might still have a similar effect to front-loading. We think that the decision here is close to 50/50, but overall think it doesn't really matter to the market whether SEK72bln or SEK80bln of QE takes place in Q3. Note that it has not been confirmed that the Riksbank will announce its Q3 purchase plans at this meeting, but with the next monetary policy meeting not due until 30 June (with the decision and MPR published on 1 July), this week's meeting seems the natural place to make the announcement.
2. Repo rate path: Will there be any deviation of the repo rate path from zero through the forecast horizon? MNI and a unanimous consensus of sell side previews we have read think this is unlikely given comments from Ingves and Jansson to the Riksdag recently.
3. Perhaps the most interesting thing to come from this meeting will be the CPIF forecasts. As we noted in our review of the February meeting, the CPIF forecast at the end of the forecast horizon (March 2024) was 2.00% - in line with the Riksbank's target. As we allude to above, recent comments suggest that the Riksbank would look through inflation above target, particularly if it was expected to be short-lived. However, as a new quarter is added to the forecast, it will be interesting if the Riksbank expects CPIF to pick up to an above-target level.

Outside of this, we expect a continued dovish message but with no new commitments on policy and a reiteration that the balance sheet will be kept at SEK700bln through 2022.

For the full MNI Riksbank preview including summaries of 13 sell-side views and a roundup of key comments from Executive Board members since the last meeting, please click on the link below:

MNI Riksbank Preview - Apr 2021.pdf