We now pencil in a rate cut from the Riksbank at the July meeting. In our view, the markets' probability distribution should favour a scenario where (1) the Riksbank cuts its repo rate from 0.75% to 0.50% and, at the same time, (2) signals that the first hike will be delayed from Q2 15 to at least Q3 15. Hence, lower for longer. At the monetary policy meeting this week, we expect the bank to stay on hold but we would not be surprised if it were to decide to lower/flatten the rate path or event cut rates.
Swedish inflation appears to have dropped slightly further below Riksbank's forecast in March. Our assessment is that the CPI and KPIF will print -0.31 % y/y and 0.27% y/y in March, i.e. the difference versus the Riksbank increases to -0.27 and -0.22 percentage points, respectively.
We argue that re-pricing of the Swedish money market curve is likely to weigh further on the SEK and we raise our 3M forecast to 9.05 (8.80), our 6M forecast to 8.95 (8.80) and our 12M forecast to 8.75 (8.60).
We forecast a rise in Norwegian core inflation to 2.5% in March from 2.4% in February. This would be in line with Norges Bank's projections in the March monetary policy report and so will not have an impact on the central bank's interest rate expectations. But it still underlines that Norway contrary to the eurozone and Sweden is not struggling with deflation and is supportive for our positive NOK view.
Norges Bank will tap the new Mar 2024 NGB for a third time in a row. The bond might cheapen ahead of the auction as seen at the two first auctions.
No currency intervention in March indicates that Danmarks Nationalbank is in no hurry to hike rates given the DKK support from the current account surplus.
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