MNI Riksbank Review - September 2021: Waiting for November

Executive Summary:

• The September Riksbank meeting had no surprises, no real change of tone and medium-term forecasts that were largely unchanged too.
• The Riksbank's comments were seen as dovish on the margin, but largely in line with market expectations. And there was little movement in markets on the back of the release.
• We round up the highlights from the meeting along with the views of either sell side analysts.

MNI Riksbank Review - Sep 2021.pdf

The September Riksbank meeting had no surprises, no real change of tone and medium-term forecasts that were largely unchanged too.

• Near-term inflation forecasts were in line with or higher than most expected, but medium-term inflation is back to target. This leads to a high bar to a hike – if the Riksbank will look through high inflation and not shift its repo rate forecast, it continues to appear confident this is a temporary rather than a sustained move higher.
• The emergency liquidity operations (that haven't been used in size for a few months) are going to be discontinued from the start of 2022. Due to their lack of usage this will have little impact and Governor Ingves said in the press conference that these could be reinstated quickly if needed.
• The base case for almost all analysts ahead of the September meeting was for no change to the repo rate forecast (although it was seen that there was a risk).
• However, the base case for most was also that at the November meeting, the Riksbank would put in some probability of a rate hike when it extended its forecast horizon through a further quarter to Q4-24. That base case remains.
• Regarding QE, there was an announcement that reinvestments would be smoothed through 2022. Some had looked for a slight front-loading. But note that this creates a bit of a bumpy balance sheet – something the Riksbank doesn't appear at this stage to be too concerned about. More details will be released in November for this too.
• To sum up, the Riksbank's comments were seen as dovish on the margin, but largely in line with market expectations. And there was little movement in markets on the back of the release.