Riksbank Preview: Forecasts from five major banks, joining the 50 bps club

The Riksbank is set to announce its Interest Rate Decision on Thursday, June 30 and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks for the upcoming central bank's meeting. 

The Riksbank is set to hike rates by 50 basis points (bps) to 0.75%. 

SEB Bank

“We expect the Riksbank to hike the policy rate by 50 bps and we also project an additional 50 bps hike at the September meeting.”

TDS

“We now look for three consecutive 50 bps hikes this year, before the pace slows to 25 bps hikes in 2023 until the policy rate hits 2.5%. Moreover, while a more aggressive QT schedule might also be adopted, we do not expect any more updates at the June meeting and think the Riksbank will continue to signal that the policy rate will remain its main policy instrument. We do not expect the policy rate to overshoot neutral. Like the ECB, we expect a more gradual glide into neutral as the central bank grapples with what is largely a supply-side shock to the economy.”

ING

“The Riksbank looks set to join the ever-increasing band of central banks hiking by half-point increments, for two key reasons. Firstly, the Riksbank holds fewer meetings each year than other central banks and it has only two further scheduled opportunities to change policy after this week. Thursday’s meeting is an opportunity to get out in front of the ECB, which is poised to hike twice before the Riksbank meets again. Secondly, the Riksbank laid out a few scenarios in April, and core CPIF is so far tracking its ‘higher inflation’ path which policymakers indicated at the time would require an accelerated pace of tightening. Wage pressures are also building ahead of important negotiations later in the year. A 50 bps hike at this meeting, and probably another in September, therefore, look likely. Recent SEK depreciation will be an area of nervousness, though the Riksbank will need to weigh this against early signs of a weakening in the housing market, where a little under half of new loans are on floating rates.”

Danske Bank

“We now do not only expect 50 bps being delivered at the upcoming June meeting but that it will be followed by two additional 50 bps hikes in September and November (previously we had 50/25/25). The risk for even larger increments than 50 bps (75 bps) should not be ignored, but we do not see it as the main scenario at this point, as it requires a significantly higher inflation outlook. We keep a 25 bps hike for Feb-23 in our forecast, but the hiking cycle could well stop in November already. As for QE, the Riksbank in April decided to cut the reinvestment volumes in half for H2. We see a chance for another downward adjustment, but it is not our base case.”

Nordea

“We now believe the Riksbank will hike by 50 bps at all the remaining three meetings of the year, leaving the repo rate at 1.75% at the end of the year. Larger increases cannot be ruled out, and the Riksbank could even decide to hike rates between meetings, as there are almost three months between the June and September meetings. We also think the central bank will start to allow its bond holdings to fall and see that starting in Q3, the reinvestments of maturing bonds will stop. Looking further out, we do not see any further hikes from the Riksbank next year, as the weakening housing market and households under pressure favour unchanged monetary policy. We do not expect the string of rate hikes to boost the SEK. The market already prices in much more than our baseline, while the housing market woes and generally wobbly risk appetite are drags on the currency.”

See – EUR/SEK: Krona's short-term outlook remains clouded – ING