SEK still has some catching up to do and is likely to appreciate – Commerzbank
Sweden’s January core inflation surprised on the upside. Thus, economists at Commerzbank expect the Riksbank to deliver more rate hikes, lifting the Krona.
The Riksbank might have to do more
“Even though headline inflation fell slightly more significantly in January to 9.3% the core rate rose to a new high of 8.7%. That means there is broad-based price pressure and it is showing no sign of abating. Against this background the Riksbank’s hawkish February decision, which became obvious once again with the publication of the minutes yesterday, is more than justified.
“It is possible that Riksbank will have to do even more, especially to control core inflation if it turned out to be too stubborn or risen even further. And particularly because the Riksbank was so hawkish in February it is credible in its fight against inflation so that the likelihood of it actually hiking its key rate above the signalled peak if necessary has risen.”
“Future inflation data will be decisive as to how far the Riksbank will have to move in the end. However, after the February meeting it has become less questionable that it will take all necessary measures. That is why I feel confident in my view that SEK still has some catching up to do and is likely to appreciate.”
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FXStreet Insights Team
FXStreet
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