Riksbank still expected to hike rates in December – Danske Bank

Chief Analyst at Danske Bank Arne Rasmussen gives his views on the prospects of a rate hike by the Riksbank by year-end.

Key Quotes

“EUR/SEK is gyrating between risk-off and December hike on. As noted, the upside inflation miss had a substantial impact on the SEK yesterday, with EUR/SEK instantaneously falling more than 10 figures, eyeing technical support at 10.35 (2 October low)”.

“The next key economic event in Sweden is the Riksbank’s rate decision on 24 October. Does the September inflation data suggest the Riksbank will adopt a more hawkish stance? It cannot be ruled out and it is possible the market will trade that way in the coming two weeks (EUR/SEK lower)”.

“However, given that the outcome confirmed the Riksbank’s forecast, we believe it will more or less repeat the message to hike in December or February, leaving the rate path for 2019 intact. We (still) believe in December and we think the first hike in seven years will support the SEK even though 25bp is almost fully priced