Riksbank: Rate hike risks rise – Nomura

Nomura strategists expects the Riksbank to keep its policy rate at 1.75% in August, with no change through 2026. Despite low Swedish inflation and anchored expectations, stronger activity data, Middle East-related energy risks and anticipated European Central Bank (ECB) tightening increase the probability of an earlier Riksbank hike than their current forecast for December 2027.

Policy rate on hold, hike risks rising

"We expect the Riksbank to leave its policy rate on hold at 1.75% next week. Inflation remains low, as CPIF ex-energy and with constant taxes was 1.3% y-o-y in July, having stood below 2% every month of the year so far. However, economic activity data have looked much stronger recently and the continued closure of the Strait of Hormuz adds to upside inflation risks."

"Furthermore, the ECB has already raised its policy rate once this year, and we expect it to do so again in September. While we do not think these pressures will push the Riksbank to vote for a rate rise this time, the growing risk to our forecast for the Riksbank’s policy rate is an earlier hike than we currently see (December 2027)."

"Therefore, we would expect the Riksbank’s statement to continue to highlight high levels of uncertainty and that the Riksbank is ready to act if necessary, but is still content to leave the policy rate unchanged and monitor developments. It could be that, similar to in May’s statement, the Riksbank refrains from providing formal guidance on the future policy rate path due to the heightened uncertainty, preferring to wait for a forecast meeting to do so."

"We maintain our forecast of no change in the policy rate this year, but continue to forecast a hike at the end of 2027. There are clear risks to our forecast that this rate rise will be brought forward – risks reflected in market pricing of one to two hikes by year-end."

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