Riksbank preview - inflation is just strong enough -TDS

Analysts at TD Securities explained that they are looking for the Riksbank to keep its policy rate on hold, in line with unanimous consensus.

Key Quotes:

"But while expectations around the Riksbank's policy rate projections have turned more dovish, we think that the Riksbank will maintain its forecast for a 2018 Q4 rate hike."

"The inflation picture is mixed with CPIF holding up well and CPIF ex-energy still surprising slightly to the downside, but we think that general inflation trends are likely just strong enough for the Riksbank to justify beginning to raise rates later this year."

"The market reaction could be a bit tricky with the elections three days later. The market reaction "should" be hawkish, as there's growing expectation that the Riksbank pushes back its first rate hike. But markets may be too focused on the election, and especially international investors overreacting to any talk of Swedish Democrats (far-right) gains."

"With markets still lacking conviction for a rate hike in December, we prefer entering the meeting with a mildly bearish view on front-end rates, holding a steepening view for the RAZ8-RAZ0 contracts, and while geopolitical tensions have further fueled recent SEK weakness, confirming the start of a gradual tightening cycle should firm trends there, as well."