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Nordic & Swiss Economics Weekly

Dumbo does monetary policy in Stockholm

The elephant-based metaphor used by Governor Ingves this week to describe how the ECB’s actions affect the Riksbank was particularly well judged given the increasing chance that Swedish and euro-zone policymakers will deliver mammoth 50bp rate hikes over the coming months. It will be another very quiet week on the data front next week. Riksbank Deputy Governor Anna Breman is due to participate in a panel discussion on the growing role of the financial sector in the climate transition on Tuesday but we would be surprised if she resisted using the platform to deliver a hawkish policy message.
ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

20 May 2022

Nordic & Swiss Chart Book

Rising CPI expectations occupying minds at Riksbank

Just as policymakers at the ECB are becoming more concerned about inflation expectations, the rise in expectations in Sweden is giving the Riksbank plenty to fret about too. The Bank’s preferred measure – gleaned from a survey of money market participants over a five-year horizon – jumped from 2.2% in April to 2.4% in May. (For context, the previous series high was 2.3%, set in September 2009.)

13 May 2022

Nordic & Swiss Economics Weekly

NATO retaliation; Riksbank eyeing front-loading?

Even if reports that Russia is close to cutting off the supply of natural gas to Finland prove accurate, Finland seems well placed to replace Russian flows with LNG imports from elsewhere. So, while Finland’s economy will be hit harder than most other euro-zone economies from a broader loss of trade with Russia, the direct effect of a cessation in Russian gas supplies in retaliation for its NATO application would be small.

13 May 2022

Key Forecasts

Key Market Forecasts

 

Forecasts

 

Forecasts

Latest

End 2022

End 2023

End 2024

 

Latest

End 2022

End 2023

End 2024

Swiss policy rate

-0.75

-0.25

1.00

1.00

Swiss fr/euro

1.03

1.00

1.05

1.05

Swe. repo rate

0.25

1.00

2.00

2.00

Swed. Kr/euro

10.50

10.50

10.00

9.75

Nor. depo rate

0.75

1.50

2.50

2.50

Nor. Kr/euro

10.25

9.50

10.00

10.00

Den. depo rate

-0.60

0.00

1.25

1.25

Dan. Kr/euro

7.44

7.45

7.45

7.45

ECB depo rate

-0.50

0.25

1.50

1.50

US$/euro

1.06

1.00

1.10

1.15

Sources: Refinitiv, Capital Economics


Dumbo does monetary policy in Stockholm

Nordic & Swiss Economics Weekly

25 May 2022

Our view

The higher prevalence of renewables in the energy mixes than in most of Europe means the squeeze on incomes from higher gas prices will be less acute in Switzerland and the Nordics, and Norway even stands to benefit from elevated commodity prices. But as highly open economies, Switzerland and Sweden are exposed to weak growth in key trading partners in the eurozone, and we have lowered our already below-consensus 2022 GDP forecasts for both countries. Having started its tightening cycle in April (as we predicted), the Riksbank is increasingly likely to front-load its tightening efforts this year, as is the Norges Bank. Meanwhile, we suspect that the SNB will take the cover afforded by ECB to back away from its extreme policy footing.

Latest Outlook

Nordic & Swiss Economic Outlook

Under pressure from weaker euro-zone growth

The higher prevalence of renewables in the energy mixes than in most of Europe means the squeeze on incomes from higher gas prices will be less acute in Switzerland and the Nordics, and Norway even stands to benefit from elevated commodity prices. But as highly open economies, Switzerland and Sweden are exposed to weak growth in key trading partners in the eurozone, and we have lowered our already below-consensus 2022 GDP forecasts for both countries. Drop-In (Thurs., 14:00 BST): Nordic & Swiss – Shortly after the Riksbank meeting, economists from our Europe and Markets services will be online to discuss the monetary policy outlook for the region’s economies and currencies as the ECB turns hawkish. Register now.

27 April 2022