Fixed Income, Credit And FX Strategy Sweden

Published 01/14/2016, 06:58 AM
Updated 05/14/2017, 06:45 AM

Amid increasingly upbeat growth-related data, the market has seemingly stopped expecting more measures from the Riksbank. The connection between growth and inflation, however, is still weak, and we argue the Riksbank remains very much devoted to its inflation rate target. For those in doubt, the Riksbank's announcement that it is ready to intervene in the FX market should prove its commitment.

Our inflation forecast in the coming months points to continued downside risk in the Riksbank's projections. Hence, the SEK appreciation is clearly not welcome as it exacerbates the inflation problem. We expect too low inflation to linger and, consequently, another rate cut in April, at the latest. The risk of an FX intervention in coming months is high.

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