More important the rate path was revised down significantly. The new repo rate path has a probability of close to 40% for a rate cut in July, which is as clear signal of a rate cut as it gets.
Against this background we revise our repo rate forecast. We now forecast a rate cut to 0.50% in July and then a first rate hike in Q1 2015. Our previous forecast was unchanged rates until December 2014.
For this reason we also change our EURSEK forecast. We now see EURSEK trading at 9.05 in 3 month time and at 8.80 at year-end. Previous forecast 8.70 and 8.50, respectively.
The macro-economic projections were largely revised in line with expectations. The CPIF-inflation is now forecast at 0.7 % in 2014 (0.9% in February) and 1.7% in 2015 (1.8% in February) . Our forecast stands at 0.8% in 2014 and 1.5% in 2015. GDP is now expected to grow by 2.7% in 2014 and 3.2% in 2015. Unemployment is expected to decline to 7.9% in 2014 and 7.3% in 2015.
Repo rate forecast (February in parenthesis)
2014Q2 0.75% (0.72%)
2014Q3 0.66% (0.71%)
2014Q4 0.65% (0.71%)
2015Q1 0.73% (0.89%)
2015Q2 0.90% (1.25%)
2015Q3 1.20% (1.59%)
2015Q4 1.60% (1.88%)
2017 Q1 2.65% (2.71%)
Nordea