Riksbank weakens SEK

Last week we published our latest edition of SEK Views, in which we raised our December EUR/SEK forecast to 9.05, mainly because we now expect the Riksbank to lower interest rates. For some time now, the Swedish central bank has been under increasing pressure to cut the repo rate, especially since the ECB refi rate reduction two weeks ago. Last week’s inflation figures were well below expectations, emphasizing once again the lack of inflationary pressure within the Swedish economy. Despite the Riksbank’s continued strong focus on financial stability and concerns over renewed upward pressure on house prices, we believe the balance has now shifted in favor of a 25bps rate cut to 0.5%, probably as early as Dec 17.