Riksbank hikes its Rate by 50bps to 3.50% as expected; Dissent from Bremen and Floden (3-2 vote split); forecast indicate 25bps hike in June or September; peak rate seen at 3.65% (prev. 3.33%), Q2-2026 average 3.35%; reiterates language on SEK

DISSENT

• Bremen and Floden opted for 25bps and an interest rate path that indicates a high probability  of further increases in June and/or September.


• "Against the backdrop of well anchored inflation expectations, the moderate wage increases and the weak and downward-revised forecast for domestic demand, they argued that the monetary policy tightening should now proceed gradually to keep the door open for alternative courses of action later in the year, including a return to larger increases if inflationary pressures do not slow down sufficiently quickly."

SEK

• Desirable for SEK to be stronger

Via Riksbank

Reaction details (08:40)

• Following the dovish hike (see analysis) EUR/SEK rose from 11.2885 to a 11.3875 session high over the course of five-minutes.

Analysis details (08:40)

• Overall, a dovish 50bp hike from the Riksbank, as the magnitude was accompanied by guidance for a 25bp hike in June or September (vs consensus June), the repo-path implying a cut by Q2-2026 (vs consensus unchanged) and two dovish dissenters resulting in a 3-2 vote split for 50bp vs 25bp.


• On the dissenters, this was not entirely unexpected given the economy's sensitivity to tightening and the marked easing in March's headline inflation alongside market pricing heading into the meeting and the minority of calls from desks for a 25bp hike. Note, the dissenters were Breman and Floden who are typically on the dovish-side of the Riksbank.


• As expected, the statement reiterated that a stronger SEK would be desirable.


• Looking ahead, we are attentive to developments on both inflation and the resilience of the domestic economy as to whether the final hike will occur in June or September and thereafter for any adjustments to the implied timing of rate reductions.

26 Apr 2023 - 08:30- ForexData- Source: Riksbank