In view of analysts at Nordea Markets, it has been a week of convincing inflationary signals for both the Riksbank and Norges Bank.
Key Quotes
“Ahead of the December meetings in both, the inflationary signals this week bodes well for the odds of hawkish messages.”
“In Sweden, the rebound in core inflation (CPIF ex. energy) finally appeared, as yearly core inflation jumped to 1.6% above market expectations of 1.5%. Also, the all-important service inflation component showed a small rebound (see chart 8). This will be satisfying to watch for deputy governor Per Jansson, who recently said that the service inflation needed to rebound before December.”
“The market reacted to the inflation print with a big bull-run in the Swedish Krona. Maybe a little over-hysterical in our opinion, considering core inflation at 1.6% was spot on the forecast from the Riksbank itself. Thus, it is not a big game-changer. The market pricing of the Riksbank now implies a large likelihood of a December hike.”
“We agree with that, but we also find it likely that the Riksbank will cushion the rate hike in almost every way possible to try to prevent a too dramatic strengthening of the SEK. The global stock-market will be more important than the Riksbank for the EUR/SEK path short term, now that the December pricing is more or less in place.”
“Elsewhere the Swedish economy is still showing signs of a slowing momentum. We expect more slowing to come.”
“In Norway, core inflation (CPI-ATE) stayed at elevated levels at 1.9% (Norges Bank forecasted 1.6%, Nordea 1.8%), which means that the August inflation was not a fluke. Inflation now argues for an upwards revision of the December rate path from Norges Bank.”
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