Tighter monetary policy on the horizon

While the Nordics and Switzerland seem to have made slow starts to 2018, the outlook for these economies is generally pretty bright. Nevertheless, healthy rates of economic growth will push up inflation at different speeds in different countries. We think that the Riksbank will respond to rising inflationary pressure by increasing interest rates more quickly than investors expect, causing the krona to strengthen. By contrast, we suspect that the central banks in Switzerland and Norway will tighten policy more slowly than investors anticipate. As a result, we forecast the Swiss franc and Norwegian krone to depreciate.