Date: 13 Feb 2018
Wednesday morning will see the latest policy decision by Sweden’s central bank, the Riksbank. The publication of the actual rate decision and the accompanying monetary policy report at 0830GMT will be followed at 1000GMT by a press conference which both Stefan Ingves, the governor of the Riksbank, and Jesper Hansson, head of the Swedish central bank’s monetary policy department, will attend. All 14 analysts polled by Reuters last week see Sweden leaving interest rates unchanged at minus 0.5 per cent but with the majority expecting Sweden’s first rate hike since July 2011 to occur later this year. Traders might be interested to know however that Sweden’s largest bank, Nordea Bank AB, now feels the Riksbank won’t hike until 2019. As it stands the Riksbank’s preferred measure of inflation, CPIF, has been around the Swedish central bank’s 2 per cent target level for a good period while expectations of inflation in five years are where the Swedish central bank might wish them to be. But, as analysts at Denmark’s Danske Bank have noted, during 2017 there were a lot of ‘one-off’ factors, such as tax hikes and new statistical methodology, that helped keep Swedish CPIF around 2 per cent.
There may therefore be a negative base effect that weighs on the level of Swedish inflation in early 2018. Danske also noted that with USDSEK materially lower than this time last year, there’s no inflationary pressure through that currency channel. Thus far the Swedish central bank has stuck to its forecasts and markets aren’t expecting that situation to change on Wednesday. Traders may wish to pay close attention to what the Riksbank says on Wednesday. The Swedish krone (EURSEK, USDSEK) might well react badly if the Riksbank were to indicate that it is pushing back the time when it could make a rate hike.
Written by Neal Kimberley, External Currency Analyst.