MNI RIKSBANK WATCH: Seen On Hold, Eyes On Future Easing

The Riksbank is widely expected to leave its policy rate on hold at 2.25% at its May meeting, while the economic analysis and press conference with Governor Erik Thedeen are likely to highlight both concerns over downside risks to growth and caution over the inflation outlook.

Deputy Governor Per Jansson recently told MNI that while downside growth risks from the disorderly effects of shifts in U.S. trade policy are clear the impact on inflation is less so, and he highlighted concerns over potentially dislodging inflation expectations in the wake of recent episodes of elevated inflation. Without a full set of forecasts at this week’s interim meeting, the message from Governor Erik Thedeen at Thursday's press conference is likely to be guarded. (See MNI INTERVIEW: Riksbank Eyes Inflation Expectations - Jansson)

In March the Riksbank held its policy rate at 2.25%, stating that it was likely to “remain at this level going forward," and any change to this wording may remain agnostic as to if and when the next cut will come.

But, while 2.25% is the mid-point of the Riksbank's range of estimates of the equilibrium rate of interest or R star, analysts are increasingly taking the view that that the policy rate will be lowered again this year, and perhaps by as early as June. (See MNI INTERVIEW: Rapid Rate Move Up More Plausible-Riksbank Head )

Hits from trade turbulence and uncertainty to the export-driven Swedish economy may be shifting the dial towards further easing. Activity data have been weak, with growth flat on the quarter in the Q1 flash estimate compared to the Riksbank 's 0.5% q-on-q prediction, while core inflation (CPIF ex-energy) also undershot expectations, coming in at 2.97% year-on-year in March, versus 3.13% predicted by the Riksbank in March.