rate normalisation

Sweden is forecast to raise rates next week by 25bp, taking the repo rate to 1 per cent. If this happens, Sweden will have the honour of being the only European serial rate-raiser – an exclusive club spread across the globe, including Israel, Taiwan and Chile. Other rate-raisers have paused. From Citi:

We expect the Riksbank to continue its policy normalization, hiking by another 25bp to 1.0% at the upcoming October 25-26 meeting. Such a move would echo the September conditional interest rate path and also be in line with current market pricing (discounts about a 92% chance of such an outcome)…

We see compelling reasons building, though, for a downgrade of the longer-term part of the Riksbank’s rate path. There is little sign of inflationary pressures building and, combined with an uncertain global economic outlook and lower global interest rate expectations, the Riksbank should be in no hurry to hike, once the policy rate has reached more normal recessionary levels (of around 1.25-1.5%, in our view).

 Read more