Yesterday, the Riksbank chose to reduce inflation (in particular CPIF ex energy due to lowerthan-expected wage increases) and GDP forecasts (now recognising that housing construction activity will decrease more than expected previously) while keeping the repo rate unchanged, points out Senior Analyst, Piet P.H. Christiansen at Danske Bank.
“We have elaborated with a base Riksbank scenario (no rate hikes this year) and a not improbable alternative scenario (one or possibly two hikes then a pause for a year or so). Admittedly, it looks like a close call. That the Riksbank is sticking to the rate path despite lowering the inflation forecast could be taken as hawkish but, in our view this is not really vindicated by the policy report. This suggests that the Riksbank was close to delaying the first hike. For now, we stick to our base case as the most probable but the minutes published on Friday next week will be of the essence just like the coming inflation data.”
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