How much is to be expected from the Riksbank? – Commerzbank

The Swedish inflation figures for August could give us a clearer picture of whether the Riksbank sees three or two more rate cuts for the rest of the year. In August, it stated: “If the inflation outlook remains the same, the policy rate can be cut two or three more times this year”. In doing so, it implicitly signaled another possible interest rate cut and almost completely aligned itself with market expectations, Commerzbank’s FX Analyst Antje Praefcke notes.

Inflation figures to be rather neutral for the SEK

“In fact, the underlying inflation trend for the monthly seasonally adjusted rates of change is in line with the inflation target, while the annual rate has even fallen below the 2% target due to base effects (1.3% in June, 1.7% in July). Due to base effects, the annual rate in August could even be slightly below the July figure again. Although the core rate is still slightly above the trend according to seasonally adjusted monthly rates of change and in the annual rate (2.2% in July), it has also stabilized close to the target.”

“In this respect, the inflation figures suggest that the Riksbank is more likely to cut three more times this year — i.e. at every meeting. In addition, the latest growth figures have been disappointing. The economic weakness is an additional argument for a looser monetary policy.”

“The market has already gone a long way in its rate cut expectations and has fully priced in three moves by the end of the year, even seeing a small chance of a little more than 75 basis points in total. The publication of the inflation figures should therefore be rather neutral for the SEK.”