Over the past few months, the Riksbank has repeatedly made it clear that tolerance for negative (low) inflation surprises is very small and that it is ready to act again, even between regular policy meetings. Therefore, following April CPI coming in four-tenths below the forecast, we thought the Riksbank would do as it had said and cut rates (10bp) at today's non-policy meeting. However, this does not appear to be the case. Around 16:00 CET, it was confirmed that the board meeting had ended. So, it appears there was no policy decision (unless the board has decided to postpone an announcement until tomorrow).
So, what next? Well, if the reason for inaction is that the Riksbank wants more information about whether the April CPI data was a one-off dip, it will have to wait until 11 June when May data are released. In our view, this makes the non-policy board meeting on 1 June pretty uninteresting. After this, the next (non-policy) meeting in line is on 22 June. Again, if May data are low again (the latest released forecasts are 0.0 y/y for CPI and 0.9 y/y for CPIF), it is reasonable to price in say 10bp for that meeting we think. There is a regular policy meeting on 1 July (announcement the day after as usual).
In our view, this is getting increasingly silly. We are sitting here waiting for a policy announcement that we cannot be certain will come and if it does, when it will be.
As time passed without anything coming out from the Riksbank, EURSEK started to drift lower and FRAs out to June-16 were up slightly.
In any case, we have been receivers in FRA Sep-15 (position opened on 7 May at -16bp with P/L at -30bp/-6bp). However, last week we reduced the position by half, locking in a profit on that part of 12bp. Despite inaction today, we have decided to keep the remaining part of the position.
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