POWER: Terna Starts Works on Western Branch at 1GW Tyrrhenian Link

• SX5E (21st Nov) 4650/4600ps, bought for 2 in 6.25k.
• SX5E (21st Nov) 4350/4300ps, bought for 1 in 12.5k.

EURSEK has pared the modest increase seen into the policy decision, now up 0.13% today at 11.1880 (vs a session high of 11.2015). There’s also little net change in rates at the front of the FRA curve. 

• Overall, the August decision keeps a September cut on the table, but does not signal an urgent need to ease policy at that meeting. The recent inflation rise is deemed as temporary, but still requires “vigilance”, while the Board is still cautiously optimistic about an economic recovery.
• There is plenty of data still due ahead of the September 23 decision, including August inflation and final Q2 GDP.
• Focus turns to the tone of the Governor’s press conference at 1000BST/1100CET.
• First Deputy Governor Breman will also give a presentation on the latest rate decision tomorrow, before the full August minutes are released next Tuesday.

Some highlights from the Monetary Policy Update, with screen as balanced albeit with some dovish remarks around inflation and the krona. 

• On the recent EU-US tariff agreement: “The new tariff agreements are in line with the assumptions made by the Riksbank in June. There is now somewhat more clarity regarding the US import tariffs faced by the EU”…“ Measures of economic uncertainty have declined but are still elevated. Overall, developments abroad have been in line with the forecast in June”.
• Still good conditions for an economic recovery next year (which should guard against the dovish risk of a policy rate below 1.75%): “However, there are good conditions for a rebound in the Swedish economy later this year. Interest expenditure for households and companies has fallen and real wages are continuing to rise”…“ The low growth in the economy is contributing to it taking longer until labour market conditions improves”
• Playing down the recent rise in inflation: “Much of this can be explained by prices that usually vary significantly, such as for foreign travel and rental cars, while prices for other services and goods overall increased in line with the forecast in June. This indicates that the unexpectedly high inflation is temporary” … “The indicators are not pointing to any lastingly elevated inflationary pressures”
• Krona is considered to be having a dovish impact (as we noted in our preview): “Despite some weakening during the summer, the development of the krona is expected to have a dampening effect on inflation.”