The Riksbank should hike by 50 bps today, in line with expectations. Economists at ING think it is necessary to sound hawkish to help restore confidence in the Krona.

A big day for the Riksbank

“We expect, in line with consensus, a 50 bps rate hike today. This outcome is fully priced in, but more uncertainty lies around the forward-looking tone and rate projections. Rate projections from November see a peak below 3%: we think today’s revision will take it to at least the 3.25-3.50% region.”

“We think a hawkish 50 bps hike by the Riksbank can prevent another leg higher in EUR/SEK: a primary goal is to create a cushion for the pair to the all-time March-2009 11.68 highs.” 

“SEK is not lacking room for recovery (our base case is still for a drop below 11.00 in EUR/SEK by the summer). We doubt this will happen in the near term though, and despite a convincing hawkish message by the Riksbank today, restoring confidence in the Krona will require help from data.” 

“EUR/SEK may trade around 11.20-11.40 in the coming weeks, and that should already be a welcome development for the Riksbank.”

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