The Riksbank delivered at its meeting yesterday and cut the key interest rate by 25 basis points to 3.50%. The big question was how many further rate cuts it would signal for the rest of the year. It became somewhat more dovish and spoke of somewhat faster rate cuts than in June, Commerzbank’s FX Analyst Antje Praefcke notes.

Krona gains slightly after the Riksbank

“This means that after yesterday's interest rate cut, the Riksbank still considers two to three more cuts (i.e. 50 to 75 bp) by the end of the year. It has thus implicitly included a further rate cut for this year in its considerations. The main reason for this is that inflation is likely to stabilize close to the target and the outlook for the Swedish economy and abroad has deteriorated.”

“The market had expected a further 75 basis points by the end of the year anyway. So the Riksbank has almost completely got in line with this view. I think that as soon as the next price and economic data indicate it, the Riksbank will switch fully to 75 basis points. It could then adjust the interest rate path a little further downwards at its meeting in September when the new forecasts are published.”