MNI RIKSBANK WATCH: Cuts 50; US Trade Moves May Affect Stance
MNI (LONDON) - The Riksbank continued its rapid easing at its November meeting, delivering its widely anticipated 50-basis-point cut in the policy rate to 2.75%, but warned that geopolitical uncertainty could shift its dovish policy stance.
Pointing to soft inflation and few clear signs of economic recovery, the Executive Board indicated it intended to make a further cut in December and another in H1.
This dovish guidance was caveated, however, by warnings about uncertainty and geopolitical risk.
"An increase in geopolitical tension could trigger new supply shocks and lead to inflation rising again ... There also remain questions marks regarding what economic policy will be pursued abroad. This applies not least in the United States, where possible decisions regarding increased trade barriers after the presidential election can have global effects on inflation and growth," the Riksbank said.
These risks, coupled with uncertainty over the exchange rate, could "affect the outlook for economic activity and inflation and lead to a different monetary policy stance," the board said.
November’s cut was required to further support economic activity and the decision had been made to cut the policy rate "somewhat faster than was assessed in September,” it said.
September guidance had said the rate would likely be cut in November and December with a 50bp cut possible in one of the meetings.