Sweden’s Riksbank has made two subtle, but notable shifts towards tightening at its November meeting. The impact on the krona proved quite contained and short-lived as external factors seem to matter more for the SEK now, according to economists at ING.
External factors simply matter more than the Riksbank now
“On Thursday, the Riksbank took two tentative steps to tightening – first, by introducing a hike in its rate forecasts (a 20bp increase in 2024), then by signalling they could start shrinking the size of their balance sheet in 2023. The move was a hawkish surprise even if it did not come anywhere close to the market’s tightening bets, which are now for 40bp in 2022 and 40bp more in 2024.”
“External drivers should remain dominant for SEK in the coming weeks and the risk is that – despite the krona having a positive seasonality in December – we could see a EZ growth re-rating capping the recovery.”
“We are currently forecasting 10.00 at the end of December, but given the worsening of the virus situation in Europe this is increasingly looking too optimistic for SEK.”
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