EU TRANSPORTATION: Heathrow: £8y FV

Norges Bank Jan FX transactions: "In January 2026, the daily net sales of foreign exchange for these purposes will amount to NOK 776 million. The net amount arises from Norges Bank needing to sell foreign currency equivalent to 650 million NOK per day on behalf of the government while simultaneously needing to sell foreign currency equivalent to 126 million NOK per day to fund the transfer of dividends to the government."

• We'd seen a few analyst estimates looking for net FX sales (i.e. NOK buying) of NOK900-950mln in January, so this is a bit less than expected. However, this may be compensated with larger net NOK purchases in subsequent months. One factor contributing to this is the end of Norges Bank's "extraordinary transfer" to the Government, worth NOK82.1bln. This transfer implied NOK selling and foreign currency buying.
• Despite the smaller than expected figure, the confirmation of Norges Bank becoming a net NOK buyer looks to have generated some light krone strength in EURNOK and NOKSEK. Yesterday's ranges in both crosses remain intact for now though.

A reminder that UK STIR & gilt futures and options listed on ICE Europe will close at 12:15 on Wednesday 31 December 2025 and will remain closed on Thursday 1 January 2026.

Overall, the Riksbank December minutes portray a Board that is very content with the current policy setting. The overall view on inflation is relaxed, with most members still more cognizant of weaker-than-desired underlying pressures despite signs of an economic recovery. Deputy Governor Seim remains a hawkish leaning outlier. 

Bunge - Balanced. Although she acknowledges lower underlying inflation pressures and does not expect an economic recovery to be too inflationary, she seems content with a 1.75% terminal rate for now.

• “Personally, I feel somewhat more assured now that we have cut the policy rate enough for this interest rate cycle, very much due to the improved economic outlook. But if there is something we have learned this year, it is that it is "better not to promise"”
• “We can already see an effect of the krona appreciation on inflation via import prices and our forecast suggests some further strengthening and a cooling effect on consumer prices next year.”…”The compilation of forward-looking indicators instead points to a bias towards lower inflation”
• “It is reasonable to believe that there is still plenty of spare capacity in the labour market, and thus a lower risk for significantly stronger inflationary pressures now that the economic situation is improving”

Seim - A bit less hawkish than in previous months: Seim acknowledges that upside inflation risks are unlikely to be realised near-term, but remains more vigilant than other Board members of scenarios which could generate "powerful" inflationary pressures.

• “Although I see upside risks for inflation, forward-looking data does not yet indicate that my fears are about to be realised”
• “I would like to reiterate that there are a number of factors that merit vigilance. A sequence of events I have given considerable thought to is one in which stronger demand effects of fiscal policy, combined with supply shocks, create more powerful inflationary pressures than in our forecast. If this were to happen, I would argue in favour of an 11 adjustment of our monetary policy more or less in line with what we described in our alternative scenario with higher inflation.”

Jansson - Still slightly dovish leaning: Sees the risk of another rate cut as greater than the risk of a rate hike, with the risk of too low inflationary pressures having increased since November.

• “We need to be prepared to quickly reconsider our stance if necessary and, if that were to happen, for my part, I believe for the time being that it would involve cutting the policy rate further rather than raising it.”
• “I stand by this conclusion and believe that the risks of inflationary pressures becoming too low a little further ahead have now even become somewhat greater”