Will the Riksbank be in line with market expectations? – Commerzbank

The general consensus is that the Riksbank will cut the key interest rate by 25 basis points today to 3.50%, after all, inflation is falling, although the monthly changes in the base rate could fall a little more, the Analyst notes FX of Commerzbank Antje Praefcke.

Two or three more moves for the rest of the year

“The economy is weakening and could be supported by interest rate cuts. In addition, the unemployment rate has been above 8% since the middle of last year, which means that the labor market can no longer be considered tight. The Riksbank also indicated at its last meeting in June that there could be “two to three” more cuts this year. All in all, the signs are clearly pointing to “lowering the monetary policy rate.”

“To be honest, I’m undecided between two (50bp) and three (75bp) other moves. But I expect the Riksbank to signal two or three more moves for the rest of the year. I’d prefer two, as core inflation in particular is likely to stay above the inflation target for a bit longer, but I assume that, sticking to its recent dovish stance, it will opt for three and thus be in line with expectations the market.

“Although the krona has recovered from the market panic attack, it is still trading at lower levels than in June, which could cause the Riksbank to worry about the resurgence of rate-induced price pressure exchange. I think it would be bold to assume that the krona will appreciate anyway due to the (expected) US and Eurozone interest rate cut cycles.”