SWEDEN: Riksbank Relief As LT Inflation Expectations Steady In April
Swedish money market participant 5-year ahead CPIF inflation expectations were steady at 2.3% in April. While this series has moved away from the 2% target in recent months, in line with an acceleration in spot inflation pressures, the Riksbank will be relieved that the April survey did not report a renewed uptick.
- In an interview with MNI earlier this month, Riksbank Deputy Governor Jansson said that rising trade tariffs are likely to depress economic growth, but while their effects on inflation may be short-lived monetary policymakers must be alert to any risk of price expectations becoming de-anchored.
- Jansson noted that while in theory the Riksbank would be able to look through elevated inflation if expectations remain stable in the near-term, Jansson highlighted the difficulties in practice of doing so and made the case for acting decisively if need be.
- One-year ahead expectations were also unchanged at 2.2%, while 2-year ahead expectations ticked up to 2.3% (vs 2.1% prior).
- 1-year ahead GDP growth expectations were revised sharply lower (1.6% vs 2.4% prior), likely reflecting US President Trumps reciprocal tariff announcements. 2-year ahead GDP growth expectations were 2.0% (vs 2.4% prior), and 5-year ahead expectations were 2.0% (vs 2.1% prior).
- As such, money market participants now expect a deeper Riksbank easing cycle over the next 24 months.
- The survey was conducted Apr 7-Apr 11.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
