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MNI RIKSBANK WATCH: A 75BP Hike Expected As Cycle Peak Nears

(MNI) London

The Riksbank is widely expected to hike 75bps in November, but elevated interest rate sensitivity and housing market fragility will make policymakers cautious.

The Riksbank is widely expected to hike by 75-basis-points on Thursday after its November meeting, following its 100bps increase in September, but hefty declines in property prices and the Swedish central bank's own research showing high household sensitivity to interest rates suggest it will signal the end of the tightening cycle is near.

After delaying the start of its tightening campaign compared to its peers, the Riksbank has moved aggressively, with all five Executive Board members voting to increase the policy rate to 1.75% in September, when its forecast showed the policy rate peaking at a little over 2.5% in Q3 2023. While market pricing indicates that this anticipated cycle high is likely to be increased this time round, the increment is unlikely to be large.

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The Riksbank is widely expected to hike by 75-basis-points on Thursday after its November meeting, following its 100bps increase in September, but hefty declines in property prices and the Swedish central bank's own research showing high household sensitivity to interest rates suggest it will signal the end of the tightening cycle is near.

After delaying the start of its tightening campaign compared to its peers, the Riksbank has moved aggressively, with all five Executive Board members voting to increase the policy rate to 1.75% in September, when its forecast showed the policy rate peaking at a little over 2.5% in Q3 2023. While market pricing indicates that this anticipated cycle high is likely to be increased this time round, the increment is unlikely to be large.

Keep reading...Show less