Riksbank does frontloading and is ready for more - Commerzbank

The Riksbank went all out yesterday by cutting the policy rate by 50 basis points from 3.25% to 2.75%, while signaling that more could follow: 'The policy rate may also be cut in December and during the first half of 2025, in line with what was communicated in September.' This confirms the view that the Riksbank was planning on 75 basis points by the end of the year anyway and has therefore taken the big step yesterday, only to follow up with another 25 basis points in December, Commerzbank's FX analyst Tatha Ghose notes.

Rate cuts might continue

"According to the Riksbank, there are not yet enough clear signs of an economic recovery, which is why it is cutting a little faster to allow inflation to stabilize close to target. If the outlook remains unchanged, the cuts will continue."

"Although the Riksbank is already being quite outspoken about the future interest rate path, it is still leaving a door open by admitting: 'Economic developments are difficult to assess at present, especially those abroad and not least following the US election. There are risks linked to the geopolitical tensions, the economic policy abroad, the krona exchange rate and economic activity in Sweden that can affect the outlook for economic activity and inflation and lead to a different monetary policy stance'."

"Growth was somewhat weaker than expected at the time, and the unemployment rate was somewhat higher, which explains the 50 bp move yesterday. The Riksbank will publish the new Monetary Policy Report with the new forecasts and the interest rate path in December. Since the interest rate decision was in line with market expectations, it had no major impact on the SEK. Similarly to the NOK, it is likely to have benefited from waning uncertainty surrounding the US election yesterday."