The Riksbank – Unchanged at 1.75% as expected and 'on hold' from here

Danske Research Team Danske Bank A/S

In a rather undramatic decision, the policy rate was left unchanged, as widely expected, at 1.75%. Guidance remains the same as in December, stating “the rate is expected to remain at this level for some time to come”. The Riksbank commented on developments since December as follows:

Geopolitical uncertainty: The Riksbank highlighted the uncertainty at the start of the year “have widened the range of potential outcomes for what can happen going forward” but also noted that the Swedish economy has so far been resilient amid the uncertainty.

Macro: The Riksbank notes that “New information indicates that household consumption continued to rise and that economic developments as a whole have been somewhat stronger than expected. The labour market situation remains weak, but there are increasingly clear signs of improvement.” The Riksbank has previously been more pessimistic on the labour market recovery than us, so this marks a small shift in a more hawkish direction. This morning’s NIER survey also points to a labor market recovery.

Inflation/SEK effect: Pulling in the other direction is the lower December inflation print, and the Riksbank also notes that the stronger SEK may contribute to subdued cost pressures in the near term. That said, the Riksbank seems more focused on the longerterm inflation pressures, adding that ”the stronger economic activity is expected to contribute to inflationary pressures normalising in line with the assessment in December.” With regards to the SEK outlook, the Riksbank seems to stick to the December KIX forecast, as they view the SEK impact on inflation as temporary and that it “is assessed that the krona will have a gradually declining effect on inflation going forward, as the krona appreciation is expected to wane.“ In other words, further and persistent krona appreciation is not welcomed, and if it happens it could have implications for monetary policy. Particularly if the main reason for the SEK rally is broad USD weakness and global turmoilrather than strong domestic fundamentals.

Fixed Income/Money market: There was no mention of the recent money market frictions, and the market reaction has been muted.

To sum up, we stick to our forecast for a 25bp hike in December, followed by March 2027 (to 2.25%).

Download The Full Riksbank review

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold moves away from one-week low, climbs above $4,450 as USD edges lower ahead of CPI

Gold builds on its modest intraday recovery from the $4,300 neighborhood, or a one-and-a-half-week low, touched earlier this Friday, and climbs above $4,350 heading into the European session. The upside potential, however, seems limited as traders opt to wait for the release of US consumer inflation figures before placing directional bets.

Cardano approaches critical support as correction risks grow

Cardano (ADA) recovers slightly, trading at $0.206 at the time of writing on Friday, inches above the critical support zone after losing more than 6% so far this week. Weakening derivatives data and fading bullish momentum suggest a bearish near-term outlook, with a decisive close below the support zone potentially triggering a deeper correction for ADA.

US core CPI data set to ease in August as markets reprice Fed September rate decision

The US Bureau of Labor Statistics will publish the August Consumer Price Index data on Friday. The report is expected to show a small decline in annual core inflation. Any divergence from analysts’ estimates could influence the Federal Reserve’s policy outlook and impact the US Dollar’s valuation.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.