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View Change: Nordea look for 1.75% by year-end

RIKSBANK
  • Nordea's base case is for a 50bp hike next week.
  • "A rate hike of 75bp cannot be ruled out on 30 June. Another possible scenario is that the rate is hiked between the ordinary monetary policy meetings, for example in mid-August after inflation data"
  • Nordea notes that developments since the April MPR are "more similar to the Riksbank’s alternative scenario in its April report where inflation is rising rapidly and is of a more sustained nature. The scenario includes a rate hike to 1.50% by the turn of the year and a repo rate of around 2.5% by the end of 2023."
  • "The exchange rate is a dilemma. On the one hand, the krona may weaken if the Riksbank does not hike rates in line with market expectations. On the other hand, rapid rate hikes may break the housing market and undermine confidence in the Swedish economy."
  • Look for further 50bp hikes in September and November (previously had looked for 25bp in November). Subsequently look for the Riksbank on hold next year.
  • "A decline in the housing market and households under pressure are important reasons for us to expect that the Riksbank will keep the policy rate unchanged next year."
  • "Also expect the Riksbank to reduce the balance sheet faster than previously announced. In our forecast we do not expect any maturing bonds to be reinvested as from Q3 this year."
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