RIKSBANK: Bunge Re-iterates Support For Front-loading Of Rate Cuts
Some highlights from Riksbank Executive Board member Bunge's speech at Bopol Live:
- "The interest-rate sensitive parts of the economy are still weaker than normal, but we see signs that we are close to a turnaround"
- "We need to boost consumption to strengthen the economy. Stronger economic activity is important in itself, but also a necessary condition for inflation to stabilise close to the target"
- *"Our forecast is that it may be cut one more time during the first half of 2025. As I argued at the December monetary policy meeting, I judge that it is better to do so in the near term rather than to wait"
- "There are a number of clouds of uncertainty obscuring the outlook for inflation and economic activity"
Front-loading of interest rate cuts is in line with Bunge's view from the December minutes: " I can imagine that the policy rate will probably be cut again when we meet after the festive season. However, as we note in the draft report, it is also important to consider the delay existing between rate cuts and their effects on the economy"
Bunge's speech also highlighted vulnerabilities in the Swedish economy arising from high private sector debt levels. Commenting on a proposal for more generous credit rules for mortgages, she noted that the Riksbank will provide a fill response in due course, but also noted concern that the proposed changes could increase financial risks, both for households and for banks: "Making it easier to borrow will not solve long-term housing market challenges".
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Historical bullets
MNI: FRANCE DEC FLASH MANUF PMI 41.9 (FCST:43.0); NOV 43.1
- MNI: FRANCE DEC FLASH MANUF PMI 41.9 (FCST:43.0); NOV 43.1
- FRANCE DEC FLASH SERVICES PMI 48.2 (FCST:46.9); NOV 46.9
ESM ISSUANCE: ESM / EFSF 2025 / 2026 Funding Update
- EFSF long-term funding plans: E21.5bln in 2025 (E20.0bln in 2024 with E18.0bln estimate from 2026).
- ESM funding plans: E7.0bln (E7.0bln in 2024 with E7.0bln estimate from 2026).
- (Corrects earlier bullet with EFSF/ESM labelled the wrong way round above)
- The 2026 estimates are new and the 2025 estimates are in line with the estimates published in December 2023.
- The ESM has confirmed that it will continue with its 3/6-month bill auctions through H1-25 (it will confirm H2-25 bill auction schedules in the June newsletter).
| 3-month | 6-month |
| January | Tuesday 07 | Tuesday 21 |
| February | Tuesday 04 | Tuesday 18 |
| March | Tuesday 04 | Tuesday 18 |
| April | Tuesday 01 | Tuesday 15 |
| May | Tuesday 06 | Tuesday 20 |
| June | Tuesday 03 | Tuesday 17 |
GILTS: Off Friday Lows
Gilts higher at the open, with core global FI peers ticking away from lows ahead of the gilt open.
- Futures recover to 94.42 before fading back to 94.32.
- Gilt futures traded sharply lower last week, resulting in a move through support at 95.49, the Dec 4 low, and 95.17, the Nov 28 low.
- A continuation lower would expose key support at 93.40, the Nov 18 low.
- Key resistance and the bull trigger is 96.54, the Dec 3 high. Initial resistance is at 95.16, the 20-day EMA.
- Yields ~1.5bp lower across the curve.
- SONIA futures now little changed to +2.0 given the uptick in gilts.
- More colour on this week’s UK market movers and BoE pricing in our early STIR bullet.
- Ultimately, labour market (Tuesday) and CPI (Wednesday) data will provide the major domestic inputs ahead of this week's BoE decision.
- Today’s flash PMI data could also impact.
- Expect our usual previews of the tier 1 data and BoE decision ahead of those events.
