Riksbank maintains its Rate at 4.00% as expected; increases monthly bond sale programme to SEK 6.5bln (prev. 5bln; vs SEB exp 7-8bln); Rate can probably be cut sooner than was indicated in November forecast - H1 rate cut cannot be ruled out

ASSESSMENT

• Executive Board now assesses that there is less risk of inflation becoming entrenched at levels that are too high.


• Maintains assessment that contractionary monetary policy is still needed to stabilise inflation close to the target.

INFLATION

• In November and December, inflation continued to fall, and when measured in terms of the CPIF excluding energy, it was lower than expected. Indicators point to inflationary pressures continuing to decline going forward.

POLICY

• Monetary policy needs to be adapted cautiously to ensure that inflation is stabilised sustainably close to the target.


• New information and how it is assessed to affect the prospects for the economic outlook and inflation is decisive in determining the monetary policy stance.

Via Riksbank

Reaction details (08:45)

• The SEK was initially subject to two-way movement given the new-style MPU. As the dust settles a dovish reaction has been seen on the updated verbal guidance (see analysis), with EUR/SEK lifting from 11.2650 to a current high of 11.2859.

Analysis details (08:45)

• As expected, the Riksbank held rates at 4.00% and announced an increase to its bond sale programme. However, the increase was to just SEK 6.5bln/month (prev. 5.0bln) shy of the SEB 7-8bln consensus.


• The main development is the view that inflationary pressures are going to continue to decline ahead and as such the risk of inflation becoming entrenched has lessened. Given this, the board says rates will likely be cut sooner than November's forecasts indicated (Nov. implied no 2024 cut) and adds additional dovishness by stating "If the prospects for inflation remain favourable, the possibility of the policy rate being cut during the first half of the year cannot be ruled out.". Albeit, this is caveated a touch by the assessment that contractionary policy is still needed at this moment.


• 
  Overall, the meeting was more dovish than expected on rate guidance though we need to see the formal forecasts at the new-style MPR on 27th March for a full judgment on this. Note, nothing on the FX hedging programme, which has now run for just over four of its four-six month lifetime; we remain attentive to the presser with Governor Thedeen for any updates.

01 Feb 2024 - 08:30- Fixed IncomeImportant- Source: Riksbank