The Riksbank surprised markets by delivering a larger-than-expected cut. The Riksbank cut 15bp to -0.50% and flattened the repo rate path out to Q2 17. The central bank said it stands ready to intervene in the FX market. Says it will reinvest maturities and coupons and stands prepared to do more QE.
Today's cut was a pre-emptive move by the Riksbank ahead of additional policy stimulus globally and in particular by the ECB. EURSEK may remain elevated in the very short-run due to general EUR strength amid global risk aversion. The pair is currently trading at 9.5081, fading a spike to 9.6107 post rate cut decision.
"We still expect another SEK50bn expansion in April. The Riksbank for the first time mentioned purchases of linkers. Reduces inflation forecast by 0.4pp 2016 but is still a bit too bullish compared with our forecast." said Danske Bank in a report.
