The Riksbank cut by 25 basis points to 3.25% yesterday as expected. But what came next was a big, moderate surprise, notes FX analyst CommerzbankAntje Praefcke.
The Riksbank is now also focusing more on growth
“In short, the Riksbank has adopted a massive pre-financing policy. In addition, further changes are possible in the short term, up to the first half of 2025, than previously announced. The Riksbank is also now focusing more on growth, which is recovering more slowly than expected, while inflation risks have eased significantly. With these significant cuts, the Riksbank wants to ensure that inflation stabilises close to the target.”
“Although the Riksbank does not formulate it this way, to me it means that it sees the following risk: that if growth remains weak or the economy even contracts, inflation could fall further and there could even be a risk of returning to deflation.”
“In principle, the moderate surprise is a negative factor for the SEK for the time being. However, a falling real interest rate should, as indicated by the Riksbank’s forecasts, help the economy in the medium term. This should provide underlying support for the SEK. A moderate appreciation of the krona therefore remains possible in the coming quarters.”
Source: Fx Street
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