Riksbank likely to lower rate path, signal delayed rate hike until next year: DNB Markets

The Riksbank is expected to lower the rate path and push the next rate hike into next year, while keeping the benchmark interest rate unchanged at the upcoming monetary policy meeting on July 3, according to the latest research report from DNB Markets.

There are mixed signals before the July monetary policy meeting. On the one hand, the actual figures for economic growth have been higher than the Riksbank expected, and inflation has been in line with expectations.

The SEK has been weaker than expected. These are arguments for increasing the rate path and would ceteris paribus signal an earlier rate hike than the current path. On the other hand, the global outlook has moderated and the downside risks are higher due to the escalated trade war between the US and China.

Foreign rates have fallen, and rate cut expectations have emerged after the April meeting. These arguments speak in favour of removing the rate hikes in the rate path.

"We find it most likely that the Riksbank will present a flatter rate path, pushing the first rate hike into next year, and hence buy itself some time to decide upon further actions. Actual figures for the Swedish economy call for higher rates in our view, but downward risks are weighing on the rate path," the report further commented.