Riksbank Preview: No Further Easing – Goldman Sachs
Lasse Holboell Nielsen, Research Analyst at Goldman Sachs, suggests that
they expect the Riksbank to leave its repo rate unchanged next week at
-0.50% and also expect the Riksbank to leave its target purchases n of
government bonds at SEK200bn.
• “The uncertainty surrounding the repo rate decision appears smaller than at recent meetings. On this occasion, we see the risk of a cut as low. We view the risk of an announcement of further bond purchases as slightly higher (as the programme is scheduled to expire in mid-2016), but overall low.
• Growth remains robust in Sweden (even if momentum has slowed slightly) and capacity utilisation appears close to normal.
• Inflation appears to be trending upwards towards target, with core inflation now close to 2%yoy, higher than projected by the Riksbank in February.
• Inflation expectations continue to edge higher, albeit slowly.
• Other central banks have eased since February, notably the ECB in March. But this was broadly as expected by the Riksbank (prompting a repo rate cut in February), implying that the delivery of the easing by the ECB in March should not prompt further action for the Riksbank.
• Communication appears slightly hawkish, with Executive Board member Skingsley showing greater willingness to look through short-term volatility and focus on strengthening inflation.
• With no major changes to the outlook, we expect no material revisions to the Riksbank’s repo rate path.
• We expect next week’s meeting to be broadly neutral relative to market expectations.”