Riksbank surprised markets today with an unexpected 25 basis points rate hike. Main interest rate increased from 0.00% to 0.25%. However, this is not the end as the Bank provided hawkish guidance, leading SEK to strengthen 1% against the euro.
Key takeaway from policy statement
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Bank will cease purchases of Treasury bills, starting today
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Asset purchases will start to be reduce in the second half of 2022
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2 or 3 more rate hikes likely in the remainder of 2022
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Main repo rate unlikely to increase beyond 2% over the next 3 years
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Inflation to remain high in near-term
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2% inflation target expected to be met in 2024
EURSEK took a hit following the Riksbank decision and is currently testing 61.8% retracement of the upward move started at the end of 2021. It should not come as a surprise as Riksbank made a major hawkish U-turn. Back in mid-February, Riskbank said that the first rate hike will come slightly earlier than expected… in the second half of 2024. Meanwhile, the first rate hike was delivered 2 and half months later, and the Bank warns that more tightening is coming this year.
Source: xStation5
