MNI Riksbank Preview - Jun '25: How Low Will The Rate Path Go?

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Preview - 2025-06.pdf

EXECUTIVE SUMMARY: 

• The Riksbank is expected to cut rates by 25bps to 2.00% on Wednesday, following through on the slight dovish tilt incorporated into the May policy statement. Data since May has veered in a dovish direction, with soft activity signals coming alongside an easing of inflationary pressures. As such, a cut towards the lower end of the Riksbank’s 1.50-3.00% neutral range appears prudent to offer further support to Sweden’s rate-sensitive economy.
• The June decision includes an updated Monetary Policy Report and rate path projection. Developments since March support a downward revision to the rate path from its current flat 2.25% level, but we don’t expect the path to move much below 2.00%. It’s still too early for the Executive Board to signal a material chance of a cut to 1.75% in the baseline projection – the June MPR alternative scenarios are best placed to incorporate a dovish pivot of that nature. We expect the path to gradually return to the 2.25% level by the end of the projection horizon.
• In the policy statement, we expect guidance to note that rates are “well positioned” to navigate the uncertain outlook, and don’t expect an explicit bias towards further easing.
• Of the 13 analyst previews we have seen, the majority (11) expect a 25bp cut in June to 2.00%. Of those who expressed a view on the June rate path, expectations are for a trough in Q3/Q4 around 1.90-2.00%. Terminal rate expectations range between 1.75-2.00% heading into the decision.