SEK: Riksbank to stay patient through energy shock – TD Securities

TD Securities expects the Sweden's central bank, Riksbank to keep its policy rate unchanged at 1.75%, noting that pre-Iran conflict inflation was running below December projections. The new energy shock raises uncertainty for both growth and inflation, but projections are unlikely to fully incorporate it yet, so policymakers are seen monitoring conditions while stressing readiness to respond if needed.

On hold as risks around energy evolve

"We expect Riksbank to keep policy rate on hold at 1.75%. Prior to the conflict in Iran, inflation was exhibiting downside risks below Riksbank's December projections."

"The onset of the conflict has significantly increased uncertainty, shifting the balance of risks on both inflation and growth."

"As elsewhere, timing becomes crucial as a prolonged energy shock could raise inflation expectations, though should the conflict resolve with limited lasting effects on energy prices, attention may revert to concerns about low underlying inflation."

"Projections at this meeting are not yet likely to take in the full potential of the energy shock and CPIF is actually set to be marked-to-market and revised down. "

"Therefore, the Executive Board will prefer to remain on hold and monitor, while emphasizing its preparedness to respond to changing circumstances."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)