RIKSBANK: MNI Riksbank Review: September 2024 - Door Opened To 50bp Cuts

EXECUTIVE SUMMARY

• The Riksbank delivered its fully anticipated 25bp cut, bringing the policy rate to 3.25%. The policy statement said that “if the inflation and economic prospects hold, the interest rate can also be lowered at the two remaining monetary policy meetings this year” but more importantly noted that “a reduction of 0.5 percentage points at one of these meetings may be relevant”.
• Governor Thedéen said in the press conference that the baseline scenario is for rate cuts to be delivered at a 25bp pace.
• Our calculations indicate the revised rate path projection includes only a small probability of 50bp cuts in November/December.
• SEK weakened against the EUR and USD following the decision, but moves were relatively modest. Markets had already come into the meeting pricing around 100bps of cuts through the remainder of 2024, so the bar for a material dovish surprise was quite high.
• The rate path indicates that the policy rate is likely to reach 2.25% at the end of this cutting cycle (between Q4 2025 and Q1 2026). This level is assumed to be “roughly in line with a level that neither stimulates nor tightens the economy” (i.e. an assumed neutral level or “r*”). 

See the full review, with a summary of sell-side analyst views, here.