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MNI Riksbank Preview-Jan '25: Guidance In Focus

Consensus has shifted more concretely towards a 25bp Riksbank cut in January, which would bring the policy rate to 2.25%
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EXECUTIVE SUMMARY: 

  • Consensus has shifted more concretely towards a 25bp Riksbank cut in January, which would bring the policy rate to 2.25%. The December meeting minutes highlighted more appetite for earlier cuts than the decision itself suggested, with Breman, Jansson and Bunge signalling a willingness to cut rates in early 2025. Data outturns since December have also supported such an approach. 
  • Only a concise “Monetary Policy Update” will be presented in January, with no updated rate path or MPR. Should a 25bp cut be delivered, it would bring the policy rate in line with the “terminal rate” of the December path. That raises the obvious question of what the March MPR rate path will look like.
  • Overall, we continue to believe the Riksbank will be happy to cut rates below 2.25% if justified by the incoming data. However, the Executive Board will likely want to take some time to assess the impact of prior rate cuts and trade policy uncertainty on domestic activity before cutting meaningfully below this level (e.g. below 2%). As such, we think the most likely outcome of the January decision is a “hawkish cut”. We think the policy statement will continue stressing the need for a tentative approach, and we don’t expect it contain meeting-specific forward guidance.
  • Analysts are almost unanimous in expecting a 25bp cut. Expectations around the policy statement guidance are more mixed, with some looking for the Riksbank to signal another cut is likely in H1 ’25, and others not expecting any hints. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Preview - 2025-01.pdf

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EXECUTIVE SUMMARY: 

  • Consensus has shifted more concretely towards a 25bp Riksbank cut in January, which would bring the policy rate to 2.25%. The December meeting minutes highlighted more appetite for earlier cuts than the decision itself suggested, with Breman, Jansson and Bunge signalling a willingness to cut rates in early 2025. Data outturns since December have also supported such an approach. 
  • Only a concise “Monetary Policy Update” will be presented in January, with no updated rate path or MPR. Should a 25bp cut be delivered, it would bring the policy rate in line with the “terminal rate” of the December path. That raises the obvious question of what the March MPR rate path will look like.
  • Overall, we continue to believe the Riksbank will be happy to cut rates below 2.25% if justified by the incoming data. However, the Executive Board will likely want to take some time to assess the impact of prior rate cuts and trade policy uncertainty on domestic activity before cutting meaningfully below this level (e.g. below 2%). As such, we think the most likely outcome of the January decision is a “hawkish cut”. We think the policy statement will continue stressing the need for a tentative approach, and we don’t expect it contain meeting-specific forward guidance.
  • Analysts are almost unanimous in expecting a 25bp cut. Expectations around the policy statement guidance are more mixed, with some looking for the Riksbank to signal another cut is likely in H1 ’25, and others not expecting any hints. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Preview - 2025-01.pdf