MNI STATE OF PLAY: Riksbank Pushes Rate Hike To Turn Of Year

By David Robinson

     LONDON (MNI) - The Riksbank left its repo rate unchanged at following the

April policy meeting but lowered its rate projection, with the central bank

saying it assesses that the first hike come "towards the end of this year." 

     Its detailed forecasts, however, suggested that the move could even be

delayed until early 2019.

     The February rate path showed the first hike in the repo rate, which

currently stands at -0.5%, coming in September but the new path shows that an

Autumn hike is no longer anticipated by policymakers.

     The numerical repo rate forecast showed it rising to -0.43% in November

this year and on up to -0.27% in February 2019. Assuming the central bank moves

in 25 basis point steps that leaves the hike pretty much priced in for the first

quarter of 2019.

     --GENTLE UPWARD PATH

     The repo rate's projected climb in the Riksbank guidance is gentle. The

repo rate was shown turning positive to stand at 0.42% in Q2 2020 and the moving

on up to 1.01% by May 2021. 

     With policy universally expected to be left on hold, the spotlight at this 

meeting was always on the Riksbank's in-house rate profile. 

     The Riksbank has been at the vanguard of central bank's publishing their

own rate forecasts, and although they publish a disclaimer stressing it is not a

promise on future action, it is at the centre of the market attention. 

--INFLATION FOCUS

Soft inflation was cited as one factor behind the decision to push back the

likely timing of the first rate hike.

     "It has taken a long time to bring up inflation and inflation expectations,

and there is considerable uncertainty over the development of inflation.

Monetary policy thus needs to proceed cautiously," the Riksbank policy summary

said.

     The headline CPIF inflation measure forecasts was nudged up to average 1.9%

in  2018 compared to 1.8% in February and was left unchanged at 1.9% in 2019.

     The policy vote split was the same as at previous meeting, with Deputy

Governor Henry Ohlsson breaking ranks to vote for a 25 basis point rate hike.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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