Riksbank Hikes Again
The Swedish Riksbank kicked off a busy week of central bank meetings in style today, announcing a full 1% hike in its headline rate. The move, which takes policy up to 1.75%, was well above market forecasts and reflects the central bank’s focus on beating inflation. Inflation was seen hitting fresh record highs of 9% in Sweden in August, highlighting the severity of the increase in prices there.
The bank’s concern over inflation was highly visible. In the statement issued alongside the decision, the Riksbank noted “The risk is still large that inflation becomes entrenched and it is extremely important that monetary policy acts to ensure that inflation falls back and stabilizes. Monetary policy now needs to act more than was anticipated in June.”
Along with the decision, the Riksbank issued a fresh set of forecasts pegging rates at an increased peak of around 2.5% next year. Consequently, the market can expect at least a further .75% worth of tightening. The bank is now alongside the BOC in having hiked rates by a full 1%. Despite the move, the market reaction has seen SEK broadly sold following the meeting with both EURSEK and USDSEK rallying firmly.
The pair has been rallying firmly off the August lows, with price trading in a neat and narrow bullish channel. Price is now testing above the 10.8045 level and, with both MACD and RSI bullish here, the focus is on a continuation higher towards the 10.9023 level next.