James Smith, developed markets economist at ING, points out that in Sweden, Riksbank has opted to keep the repo rate on hold at -0.25% at its July meeting and has kept its interest rate projection unchanged from April.

“While it’s true the domestic fundamentals haven’t really shifted – for instance inflation has come in pretty much exactly in line with the RB’s forecast – the major change is that global central bank expectations have completely collapsed since the last meeting just over two months ago. All else being equal, we’d have expected that to have modestly lowered the rate path. But following an in-depth look at krona fair value, the central bank is now forecasting a weaker currency over the forecast period and this appears to be the offsetting factor for lower overseas rate expectations. All of this goes to show that the Riksbank is relatively unfazed by the prospect of a dovish ECB. All in all, we expect the Riksbank to keep rates on hold for the foreseeable future.”