Swedbank chief economist Anna Breman and the Bank’s headquarters.
On Thursday morning, the Riksbank will provide notice of the repo rate. “This time it is an unusually uncertain situation,” said Swedbank chief economist Anna Breman to the business world.
Since last July, the repo rate at 0.35 percent. Now Swedbank track to the next statement from the Riksbank will be a further reduction of -0.50 percent.
– If there is a rate cut shows National Bank that it is ready to act and it can also have an effect on the Swedish krona, says Anna Breman.
it is mainly three factors that form the basis of Swedbank’s main scenario of a rate cut by 15 basis points on Thursday:
first Inflation – The outcomes have been below the Riksbank’s own forecast.
2. ECB – have promised a further easing of monetary policy.
third Wage negotiations – the Riksbank has informed the social partners that they should believe in the inflation target of 2 percent. But they have quite a bit of time to fulfill this because wage negotiations are expected to be completed by the end of March.
– It is these things that presses the Riksbank the most right now, says Anna Breman.
the Swedish currency is an important part of the Riksbank to bring inflation and currently is the exchange rate in line with its own forecast. Another factor that complicates the situation is that Swedish growth is rising and unemployment is falling, giving some opening for the Riksbank to hold off cutting interest rates.
– Our main scenario is a reduction but this time it is an unusually uncertain situation, says Anna Breman.
When the case of interest described Edet effect on the exchange she does not believe it to be so big. According to the chief economist of the market has already priced in a rate cut at ten points, making room for a positive surprise is limited.
– About rate cut gets bigger and maybe you can get a small upward effect. If the interest rate is still perhaps the effect is slightly negative, she says:
– I think that the international markets affect more than the Riksbank statement tomorrow.
Although not Riksbank lowers the interest rate, there are other financial tools that can be used. Swedbank economists believe that the Riksbank intends to signal an expansion of the QE program, but that the decision in question lingers into April. The ECB has already extended its support purchases to March 2017 and the expectations are high that they will expand the QE to come.
– It is very difficult to ensure that the Riksbank would not extend support purchases later in the year.
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