European Economic Comment "Riksbank: What to expect next week" Fischer

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European Economic Comment "Riksbank: What to expect next week" Fischer

core are possible until Q4 this year, when we expect a

modest pickup. Nevertheless, both our annual 2026 and 2027 forecasts (1.3% and

1.6%) remain well below the 2% target. For Riksbank rate hikes already this year, we

would need to see either an unexpected broadening of price pressures beyond energy or

sharp SEK depreciation, in our view. The latter could occur if, contrary to the UBS view,

the Fed were to raise rates this year. Together with the 50bp ECB hikes that we expect,

we could then get closer to an environment of global policy tightening that would likely

put SEK under pressure without a corresponding Riksbank reaction. In this case, a

Riksbank hike in Q4 could be warranted. For now, however, we see the Fed merely

delaying rate cuts until March 2027 and other European central banks like the BoE and

SNB on hold as well, which makes Riksbank tightening this year unlikely, in our view.

New Riksbank projections for growth, inflation and policy rate path

The June meeting will feature new macro forecasts. Compared to the March

assumptions, energy prices are higher in the near-term, the currency is c. 1% weaker,

and actual GDP and inflation have come in lower than expected. We therefore expect

downward revisions for growth and inflation this year but upward revisions for next year.

Details in Figure 1UBSexpectationsforRiksbankforecasts. In addition, we expect a modest upward revision of the policy rate

path with a steeper slope. The Q4 average forecast could indicate a higher probability of

lift-off than in March but not a full hike, i.e. sit somewhere between 1.8 and 1.9%. At

any rate, the Riksbank will likely emphasize high uncertainty and elevated risks, stressing