Riksbank Minutes: Deputy Governor Jansson believes the 2025 cut needs to come quite early in the year, in January or possibly at the meeting after that in March

GOVERNOR THEDEEN

• "My conclusion is that it will soon be appropriate to wait and see before making any further changes to the policy rate."


• "There are thus several reasons for now shifting to a more tentative approach when setting monetary policy. "


• "We will need to adopt a tentative approach and have patience, so that the cuts we have already made have time to make their mark on indicators and other data, before we consider new measures."


• The outlook for inflation is in line with the target and the long-term inflation expectations are firmly anchored at 2 per cent.

DEPUTY GOVERNOR JANSSON

• Also assess that it should be possible to make a further cut to the policy rate in the first half of next year. But I believe this cut needs to come quite early in the year, in January or possibly at the meeting after that in March.

DEPUTY GOVERNOR BUNGE

• Inflationary pressures are compatible with on-target inflation and inflation expectations are firmly anchored at 2 per cent, especially in the longer term.

Analysis details (08:38)

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  DECEMBER MEETING RECAP: In short, a slightly hawkish cut. As expected, the Riksbank cut the policy rate by 25bps to 2.50% and reiterated forward guidance that the rate could be cut again during H1-2025, with the forecasts signalling just one 25bps cut in 2025. A cut which was justified by the view that the economy remains weak, though there are some signs that activity is on its way to a recovery. Furthermore, the statement highlighted that there have been rapid reductions to the interest rate and as monetary policy impacts with a lag this argues for a more tentative approach ahead. Overall, transmission and initial signs of a recovery are seemingly the justification for the expected step down to a 25bps increment from 50bps. The announcement sparked some modest SEK appreciation which was likely a function of outside bets for 50bps unwinding (though, recent global hawkish action had already done this), the line around a "more tentative approach", elevated CPIF forecast for 2025 and the forecasts pointing to just one cut in 2025. Note, the likes of Nordea expect inflation to come in cooler than the Riksbank does and look for a cut in Jan 2025 and then another in May.

02 Jan 2025 - 08:30- Fixed IncomeImportant- Source: Riksbank