Date: 25 Oct 2017

Sweden’s Riksbank kept interest rates unchanged last month at minus 0.5 per cent and made no change to its asset purchase programme. “Inflation and inflation expectations need a more permanent ‘foothold’ than they have at present and, with the history we have behind us, a rate of inflation above target for a while would not be such a great problem, ” the minutes of the September 5-6 meeting, released on September 21, quoted Swedish central bank governor Stefan Ingves as saying. With that in mind, it’s probably fair to say that this Thursday’s Riksbank policy meeting, coming before but falling in the shadow of the ECB’s own, is judged likely to be something of a non-event by economists. In a poll taken by Reuters on October 20, all 17 economists polled expect the Swedish central bank to keep rates at minus 0.5 per cent while the nine analysts, who responded to the question, felt that the Riksbank wouldn’t adjust its own asset purchase programme at this point in time regardless of what the ECB announces. Such opinions may well help explain the move up in EURSEK through the earlier part of October.

Yet on October 16, Riksbank deputy governor Henry Ohlsson said “it is clear that when we have inflation three months in a row at a figure that is around or over the inflation target, that certainly implies that we are beginning to reach the inflation target in a sustainable way.” It is for traders to decide if the slight change in tone from Ingves’ comments in September to those of Ohlsson last week is significant or not. It may well prove to be the case that the Riksbank sticks to its current stance on Thursday. But there’s a small risk that the tone becomes slightly more hawkish. US firm Goldman Sachs made the point on Monday that while it expects the Swedish central bank “to maintain the status quo this week” it does expect “the Riksbank to shift and hike in the first half of 2018, ahead of its current projection.” It may be an outlier but maybe there’s a risk that the Riksbank might hint at a future change in stance on Thursday knowing that  the ECB will anyway steal the headlines with its own expected plans for an ECB asset purchase taper.

Written by Neal Kimberley, External Currency Analyst.