Riksbank likely to hike interest rate in December

The Riksbank is set to meet next week for its policy decision. According to a DNB Markets research report, the central bank is likely to hike policy rate by 0.25 basis points to 0.00 percent, in spite of the incoming data being a bit softer than the central bank expected. The forecast for the policy rate might be kept unchanged, hinting that the policy rate would stay at zero for at least two years.

Data since the monetary policy meeting in October has been a bit weaker than the central bank’s projection. The SEK is a bit stronger, inflation slightly lower, and growth in the third quarter was a bit weaker. Still, the Swedish central bank is expected to stick to its current plan for a rate hike in December because of: 1) the negative data surprises have been small; 2) a maintained view that the Swedish economy is weakening slowly; and 3) the executive board appears more keen to avoid keeping the policy rate extremely low for an extended period of time. The rate path from October shows that the policy rate will most likely stay at zero for a couple of years, stated DNB Markets.