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Norges Bank and Riksbank Signal Hawkish Stances
Confirmed
In Short: In Sweden, the Riksbank is also expected to leave its policy rate at 1.75%, but it will likely adopt a more hawkish stance, indicating a rate hike towards the end of the year, with the rate path leveling around 2.25%, the midpoint of its neutral rate range.
Norway's Norges Bank is expected to keep its policy rate unchanged at 4.25%, signaling that further interest rate hikes may be necessary to manage inflation, according to Action Forex and FXStreet.
In Sweden, the Riksbank is also expected to leave its policy rate at 1.75%, but it will likely adopt a more hawkish stance, indicating a rate hike towards the end of the year, with the rate path leveling around 2.25%, the midpoint of its neutral rate range.
Despite the hawkish signals, a rate hike in Sweden seems unlikely due to the pressure on the Swedish krona, though it cannot be completely ruled out, with market pricing and consensus split on the issue.
In Switzerland, the Swiss National Bank (SNB) is expected to keep its policy rate unchanged at 0%, aligning with market expectations and consensus.
Background
Norges Bank is the central bank of Norway. It is responsible for managing the Government Pension Fund of Norway, which is the world's largest sovereign wealth fund, as well as the bank's own foreign exchange reserves.
What's confirmed
- In Sweden, we expect the Riksbank to leave the policy rate unchanged at 1.75% but shift to a more hawkish stance compared with the June MPR.
- We expect it to signal that a rate hike is likely towards the end of the year, with the rate path levelling out around the midpoint (2.25%) of the Riksbank’s stated interval for neutral (1.5%-3.0%).
- In Norway, we expect Norges Bank to keep the policy rate unchanged at 4.25%, but signal that further hikes may be needed.
- In that case, Norges Bank may raise the rate while maintaining a weaker tightening bias.
What's still developing
- We do not expect the SNB to hike policy rates the coming year as we do not think the recent rise in energy prices will trigger a broad-based rise in inflationary pressures.
- Markets will focus on any pushback on market pricing of 60bp worth of hikes and change in language regarding the CHF.
- In Germany, the Ifo business climate indicator for September is due.
- We expect the assessment of the current situation to rise markedly following yesterday's strong PMIs, while expectations are likely unchanged due to the recent rise in energy costs.