Swedish Krona: Why does the Riksbank path bring February into focus? – Commerzbank

EUR/SEK could move back above 11 if rate increases are deferred and energy prices decline, according to Antje Praefcke at Commerzbank. Although the Riksbank remains restrictive after an expected policy rate increase from 1.75% to 2.00%, she notes that its statement makes a December hike less likely. In her view, the key decision is likely to be deferred until February 2027.

Could the Riksbank delay its next hike despite a restrictive stance?

"The Riksbank raised its policy rate yesterday from 1.75% to 2%, as expected. It will not publish updated forecasts until December, alongside its new Monetary Policy Report. The reason for yesterday’s rate hike is clear: Stronger economic activity combined with cost increases due to supply disruptions mean that inflation is expected to continue rising going forward."

"Inflation continues to be dampened by special factors. According to the Riksbank, inflation would be at 3% without these temporary fiscal policy measures. Due to stronger economic activity, cost increases resulting from supply disruptions and a weaker krona this year, both inflation and underlying inflation are expected to rise above 2% next year, according to the Riksbank."

"While the Riksbank is thus maintaining its restrictive stance, the statement now suggests that the case for a December rate hike has weakened. The focus is therefore shifting more towards February 2027, unless supply disruptions persist and increase the risk of inflation remaining too high, which could prompt the Riksbank to raise the policy rate again as early as December."

"Should a December hike become more likely over the coming weeks, the krona could strengthen somewhat further. Conversely, signs of an end to the Iran conflict and falling energy prices would argue for postponing the next rate hike until February or potentially even later. If the latter scenario materialises, I would expect a modest correction in the SEK, with EUR/SEK moving back above 11."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)