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Swedish Riksbank seen holding at 1.75%, SEK faces hawkish headwinds

BBH expects the Riksbank to keep its door open to a later hike, but notes Swedish inflation has been running above the central bank’s projection while still remaining below the 2% target.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman (BBH) expects Sweden’s Riksbank to keep its policy rate unchanged at 1.75% for a seventh consecutive meeting, while signaling that a hike later in the year remains possible, according to FXStreet.

BBH highlights that Swedish inflation has been tracking above the Riksbank’s forecasts, pointing to July CPIF at 0.7% year over year versus a 0.5% projection, and CPIF excluding energy at 0.6% year over year versus a 0.2% forecast.

Still, BBH says inflation remains well below the Riksbank’s 2% target, which it views as raising the bar for a hawkish repricing. That backdrop is seen as a policy headwind for the Swedish krona (SEK).

BBH also notes that swaps markets continue to fully price in a 25 basis point hike to 2.00% in December.

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