FXStreet (Edinburgh) – In the view of Analyst Kristoffer Lomholt at Danske Bank, the Nordic central bank will eventually lower its benchmark rates, regardless of the inflation path.
Key Quotes
“Yesterday’s Prospera survey showed an increasing divergence between inflation and wage expectations (the wage setting Social Partners’ that is), a slight rise in the former and a slight decline in the latter”.
“This suggests that although there is an easing of the immediate pressure on Riksbank, the long-term problem is even more aggravating as it points to lower wage deals in Q1 than the running ones (at 2.2% per year). That would be a serious blow to the inflation outlook, in our view”.
“Today’s May inflation figures could actually ease short-term rate cut pressures further, if we are right in our call”.
“Our estimate is at the top of market expectations and based on the assumption that there will be a rebound in airline tickets and books”.
“Even so, such an outcome might prove to be a short relief partly for the reasons mentioned above but also because Riksbank forecasts a very aggressive rise in inflation in September/October, a rise that not only Danske Bank but most other forecasters dismiss”.
“By and large, it is only a matter of time, rather than if Riksbank will cut”.
(Market News Provided by FXstreet)