(Bloomberg) -- Swedish fixed-income investors expect the Riksbank to cut its benchmark rate by a quarter-point next week, with a minority projecting a larger cut, a survey from SEB AB showed.
92% of respondents in the survey, conducted Sept. 16–19, believe the central bank will continue to reduce borrowing costs from 3.5% at the same pace as it did in May and August, while 8% are betting on a half-point cut. The Riksbank has said it prefers to make policy less tight in a “gradual” manner, outlining two or three quarter-point cuts before year-end.
Speculation that policymakers in Sweden could follow the US Federal Reserve and take its benchmark rate 50 basis points lower in one go has increased as the CPIF measure of inflation has fallen further below the Riksbank’s 2% target at the same time as the country’s economy remains sluggish.
Investors in the SEB survey said an unexpected drop in the core inflation measure that strips out energy prices would be most likely to trigger a larger cut, while slightly fewer say that a half-point cut from the European Central Bank would be the most important reason for such a move.
The survey also showed:
- 92% of respondents predict a policy rate of 3% after the Riksbank’s November decision, while 8% see the rate at 2.75%.
- 88% see the rate at 2.75% after the December meeting, 8% expect it to be 2.5%, and 4% believe it will remain at 3%.
- The updated rate path that the Riksbank will publish next week will show the policy rate at 2.83% in December, according to the median expectation.
- The median expectation for the benchmark rate in April and December next year is 2.5% and 2.25%, respectively.
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