**As seen in Risk In The Week report 02/04/23, cablefxm.co.uk/reports
Back in November, the Riksbank lifted its Repo rate by 75 basis points to 2.50%, the slowdown from a prior move of 1.0 percentage point market the fourth consecutive rate hike by the Swedish central bank. The bank pencilled a repo rate of about 3% for early this year, while the CPIF was projected at 5.7%, up from the prior 5.1%. They also said Swedish house prices are set to fall to pre-pandemic levels. Riksbank’s Governor Ingves said that the decision to deliver 75bps was not difficult, however, he noted that slowed rate hikes going forward would be an option. While inflation seems to show signs of slowdown in developed markets, Swedish prices remain accelerating by a double-digit pace. The latest print came in at 12.3% Y/y, this is the largest overshoot in the G10 relative to the central bank target. After having delivered 250 basis points of tightening, investors see the Riksbank extending by about 70 additional basis points of rate hikes. Analysts at Commerzbank say the February meeting will be interesting as it will be held with two new board members, and remind us that Erik Thedeen is the new governor of the central bank since the start of the year. It is impossible to say how hawkish or dovish the new members will be, so the February meeting will be interesting, they wrote. The desk at SEB see a base case scenario of a 50bps rate hike and a forecasted rate of 3.20%, this would be a lift from the prior 2.84%. SEB gives a 10% chance to the Riksbank hiking by 75bps and expect it to sell government bonds outright later in 2023.
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