Riksbank likely to keep repo rate on hold this year, may hike in H2 2018 – Nordea Bank

The Swedish inflation has accelerated to or just below the target level of 2 percent. Furthermore, inflation expectations have stabilized around the target, while the GDP growth is stronger than projection and the global outlook for monetary policy has shifted, making additional stimuli measures from the Riksbank less likely, noted Nordea Bank.

Any tightening measures from the Swedish central bank continue to be distant though. The rise in inflation is still fragile. The Swedish krona’s performance is a risk as a surprisingly sharp rise of the Swedish krona might hurt inflation, implying that the Riksbank continues to rely on the European Central Bank.

“We expect the Riksbank to keep the repo rate at -0.50 percent during 2017 and the QE programme ending by year-end 2017 will not be extended”, stated Nordea Bank.

The repo rate is expected to be hiked in the second half of next year; however, it would still be negative at -0.25 percent by the end of 2018, added Nordea Bank.

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