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RIKSBANK: SEK Little Changed Post Riksbank , Rates Likely To Trough At 2.25%

RIKSBANK
Central Bank NewsCEEMEABullet RiksbankSwedenGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets

The Riksbank made a dovish tilt to its August guidance, including opening the door to 50bps cuts in its policy statement. However, markets already came into the meeting pricing around 100bps of cuts through the remainder of 2024, so the announcement hasn’t been enough to induce any material weakness in SEK.

  • The decision was unanimous amongst the Executive Board, but more details on to what extent a 50bp cut was considered at this meeting will need to wait for the minutes next week.
  • The September MPR 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 would be slightly below the Riksbank’s most recent (albeit from 2017) neutral rate estimate of 2.50-4.00%.
  • We noted in our preview that we think the Riksbank is concerned enough by the weak growth outlook to justify cutting rates a little below neutral, but don’t think there is enough evidence to bring nominal rates below 2% over the course of next year – in contrast to market pricing.
  • From a first glance, there doesn’t seem to be any updated estimates of neutral in the September MPR.
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The Riksbank made a dovish tilt to its August guidance, including opening the door to 50bps cuts in its policy statement. However, markets already came into the meeting pricing around 100bps of cuts through the remainder of 2024, so the announcement hasn’t been enough to induce any material weakness in SEK.

  • The decision was unanimous amongst the Executive Board, but more details on to what extent a 50bp cut was considered at this meeting will need to wait for the minutes next week.
  • The September MPR 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 would be slightly below the Riksbank’s most recent (albeit from 2017) neutral rate estimate of 2.50-4.00%.
  • We noted in our preview that we think the Riksbank is concerned enough by the weak growth outlook to justify cutting rates a little below neutral, but don’t think there is enough evidence to bring nominal rates below 2% over the course of next year – in contrast to market pricing.
  • From a first glance, there doesn’t seem to be any updated estimates of neutral in the September MPR.