With the ECB poised to raise rates next Thursday, the Riksbank has got its retaliation in early, hiking its key rate by 50bp. The statement indicates that policymakers expect to raise rates by another 25bp at most but, on balance, we think a further 50bp is likely, to peak of 4%. However, we then think the Riksbank will begin to cut rates much earlier than policymakers expect and cut faster than markets imply.
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