To tell the truth, Antje Praefcke, FX Analyst at Commerzbank, would have liked the Riksbank to do more. Thus, the SEK is set to struggle.

The Riksbank stays on the ball – but no more than that

The Riksbank partially delivered yesterday, but only partially. It will reduce its assets holdings more rapidly as of September, but it was only able to decide on a 25 bps rate step to 3.75%, which had been generally expected and therefore did not constitute a restrictive signal for the market. 

Moreover, Riksbank now signaled interest rates to peak at just over 4%, which only entails one further rate step in the autumn, and which does not constitute a restrictive surprise. The Swedish central bankers now signal first rate cuts (at this point from slightly higher levels) for the summer of 2025. Restrictive surprise? Not exactly!

In my view the Riksbanks stay on the ball when it comes to fighting inflation, but no more than that. That is why to my mind yesterday’s decision does not look like a proactive move, but more like an ‘overdue reaction to past developments’. Compared with the ECB it is significantly less courageous. Therefore, it does not come as a surprise that there is pressure on the Krona.