Riksbank is expected to lift the policy rate by 50 bps to 3.00%. Krona’s poor start of 2023 could be exacerbated if the central bank is unlikely to convince markets in its fight against inflation, Antje Praefcke, FX Analyst at Commerzbank, reports.

Only a hawkish Riksbank will be able to support SEK 

“I can imagine that the Riksbank will hike its key rate by 50 bps today but then does not commit firmly to further rate hikes but, due to a high degree of uncertainty, makes its future approach dependent on the data, thus keeping all doors open in the end.”

“I do not think that in view of current inflation levels the Riksbank will already signal the first rate cuts at the very end of the forecasting horizon.” 

“The Krona has already suffered as a result of weaker economic data, if concerns were to arise that Riksbank was not decisive enough in its fight against inflation that would be fatal for the Krona.” 

“Only a hawkish Riksbank, determined to fight inflation despite a more depressed economic outlook, will be able to support SEK today.”

See – Riksbank Preview: Forecasts from seven major banks, 50 bps, but the peak is not far off