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Morgan Stanley: SEK200bln to be announced to create a positive surprise

RIKSBANK
  • Morgan Stanley expects to "see Riksbank delivering a dovish surprise and topping-up their QE envelope by SEK200bn." This comes "amid the second COVID-19 wave"
  • MS "expect them to extend purchases through to the end of 2021,and while they might decide not to use the entire envelope, should data surprise to the upside, we assume they will want to sound dovish ahead of the pre-announced ECB "re-calibration". We do not expect them to make any changes to their lending facilities, nor cut the repo rate."
  • "The weak inflation outlook - reinforced by the relatively weak negotiated wage increases - means we ultimately see Riksbank acting and cutting rates back into negative territory, with a cut to -25bp in 2H21."
  • On growth projections: "we expect them to take their 4Q20 growth projections down, and project a weaker 1Q21 too, on the back of ongoing COVID-19 restrictions. Still a strong mid-year rebound should ensure the economy gets back to normal towards the end of 2021, although mechanically this growth profile will likely lower their 2021 and increase their 2022 projections."
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