POWER: April Climbs on Cooler Temperatures

Little immediate reaction in SEK to the Riksbank’s January minutes, with the krona already strengthening a little against the EUR and USD ahead of the release.

• Overall, there remain “nuances” in views across the Executive Board, but the broad strokes of the minutes seem to align with the cautious/non-committal policy statement guidance seen last week. 

The Riksbank January meeting minutes highlight a slightly more cautious stance amongst the “doves” (Breman, Bunge and Jansson) than was seen in December. At first glance, Breman and Bunge still tilt in favour of further easing at first glance, but Jansson appears happy with rates at current levels in the absence of new information.  Seim and Thedeen continue to provide a more cautious outlook. We will review the minutes in further detail in due course.

Thedeen: "My assessment is that, with today’s decision, the policy rate has probably been lowered sufficiently. The upturn in economic activity towards the end of 2024 supports this assessment and the forecasts we published in December".

Breman: “I assess that the forecast for the policy rate from December still largely holds, but that it is important to be prepared to both cut and raise the policy rate if the outlook changes. However, my assessment is that the probability of the next step being a further rate cut is greater than the next step being a rate hike”.

Jansson: “As I pointed out at the outset, I support the assessment that the forecast for the policy rate from December still seems to hold reasonably well. This forecast means that the interest rate after the cut at today's meeting will remain unchanged at 2.25 per cent for the meantime”

• “Having said that, I would like to emphasise that I fully share the view in the draft update that we need to be prepared to adjust our monetary policy plan if the outlook for inflation and the economy changes”

Bunge: “We now have to look forward and carefully evaluate the need for coming policy rate adjustments on the basis of the effects of those already implemented. However, I consider that one additional part of the puzzle of monetary policy deliberations is the risk that monetary policy is too contractionary”.

Seim: “. In my view, we are now conducting a virtually neutral monetary policy which will eventually close the inflation and GDP gaps. This means that we are also well placed to be able to adjust monetary policy when shocks hit the economy”

The Riksbank January meeting minutes are due today at 0830GMT/0930CET. This release may provide a clearer signal on the rate outlook than the decision itself, given the non-committal policy statement guidance.

• The January rate decision (25bp cut to 2.25%) was unanimous, though Governor Thedeen suggested in the press conference that the minutes would highlight “nuances” in opinions amongst Board members.
• Key focus will be on whether the three doves from the December meeting minutes (Breman, Jansson and Bunge) still see a case for more cuts in H1 2025, and whether the March decision should be considered live.
• We expect Thedeen and Seim to continue offering a more cautious outlook for policy rates. In the January press conference, Thedeen said that the Riksbank’s “best assessment” was that there would be no more rate cuts (in line with the December MPR rate path). However, this assessment was heavily caveated, with the Governor citing significant uncertainty to the outlook (e.g. from potential trade barriers and economic fragmentation) and the need to assess incoming data in the context of the December projections.