Riksbank: Getting out of negative rates – TDS
|Analysts at TD Securities note that the Riksbank has delivered the 25bps rate hike that had been unanimously expected in its latest meet and essentially fully priced by markets, pushing the policy rate out of negative territory and back up to zero.
Key Quotes
“The Riksbank's policy rate forecasts were unchanged, and "the repo rate is expected to remain at zero per cent in the coming years." The Riksbank's stance is balanced: "Improved prospects would justify a higher interest rate. But if the economy were instead to develop more weakly than forecast, the Executive Board could both cut the repo rate and take other measures to make monetary policy more expansionary."
“There were two dissents. One was Jansson, as expected, as he would prefer "a repo-rate path that indicates the repo rate will instead be raised some way into the forecast period," once inflation is closer to target. The other one was Breman, the new Executive Board member. Her reservation was a bit different, in that she'd prefer to delay the rate hike until H1 2020, giving inflation a chance to come closer to target, but then would prefer one rate hike per year in 2021-2022.”
“The Riksbank left its 2020 GDP forecast unchanged at 1.2%, and other macro forecasts were little changed. This appears to be a bit optimistic, given the downturn in the recent Swedish data. But the Riksbank needed to deliver a fairly upbeat picture in order to justify today's rate hike.”
“The bar to cutting rates again is going to be very, very high, and we think that the Riksbank will accept a fair amount of economic weakness before even considering going back to negative rates.”
“Rate hike was more about getting out of negative rates than meeting the inflation target.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.