Key Moments
- TD Securities anticipates the Riksbank will leave its policy rate unchanged at 1.75%.
- Inflation before the conflict in Iran was running below the Riksbank’s December projections.
- Policymakers are seen staying on hold while monitoring the evolving energy shock and signaling readiness to act if needed.
TD Securities Outlook on Riksbank Policy
TD Securities expects Sweden’s central bank, the Riksbank, to keep its key policy rate unchanged at 1.75%. The firm notes that before the conflict in Iran, inflation had been running below the Riksbank’s projections from December, indicating downside risks relative to the central bank’s earlier outlook.
Energy Shock and Shifting Risk Balance
According to TD Securities, the emergence of the conflict in Iran has introduced a new energy shock that has substantially increased uncertainty for the Swedish economy. This development is described as altering the distribution of risks surrounding both inflation and growth, making the policy environment more complex.
| Policy Element | TD Securities View |
|---|---|
| Policy rate level | Expected to remain at 1.75% |
| Inflation vs December projections | Running below prior to the Iran conflict |
| Impact of energy shock on forecasts | Not yet fully reflected in current projections |
Inflation Dynamics and Timing Concerns
TD Securities highlights that the duration and intensity of the energy shock will be critical for the inflation outlook. It notes that, as in other economies, timing is a key issue: a sustained energy shock could push up inflation expectations, while a faster resolution with only limited and temporary effects on energy prices could shift the focus back to worries about weak underlying inflation.
Projections, CPIF, and Policy Stance
The firm indicates that the Riksbank’s projections at the upcoming meeting are unlikely to fully factor in the possible magnitude of the latest energy shock. It also points out that CPIF is expected to be marked-to-market and revised lower.
In this context, TD Securities believes the Riksbank’s Executive Board will opt to keep the policy rate unchanged, preferring to wait for more clarity while closely observing incoming data. At the same time, the central bank is expected to underscore its willingness and preparedness to adjust policy in response to evolving conditions.
Analyst Commentary (Direct Quotes)
“We expect Riksbank to keep policy rate on hold at 1.75%. Prior to the conflict in Iran, inflation was exhibiting downside risks below Riksbank’s December projections.”
“The onset of the conflict has significantly increased uncertainty, shifting the balance of risks on both inflation and growth.”
“As elsewhere, timing becomes crucial as a prolonged energy shock could raise inflation expectations, though should the conflict resolve with limited lasting effects on energy prices, attention may revert to concerns about low underlying inflation.”
“Projections at this meeting are not yet likely to take in the full potential of the energy shock and CPIF is actually set to be marked-to-market and revised down.”
“Therefore, the Executive Board will prefer to remain on hold and monitor, while emphasizing its preparedness to respond to changing circumstances.”
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