Swedish rates could go negative this week
Handelsbanken Capital Markets has reportedly penciled in a further cut to the key lending rate from Sweden’s central bank this week, following further deflationary pressures feeding through to the economy.
The sharply falling price of oil in particular has come on top of other factors such as weaker than expected jobs creation, which already caused a 25 basis points cut in October. Now, the Riksbank is facing a challenge in meeting its inflationary target.
Nordea Markets said in a note last week that it expected a policy response this week in response to the weaker inflationary outlook. The bank may be forced to cut its consumer price index forecast by 0.25% for December and January, Nordea warned, as oil contracts point to a slowly rising price of $75 by the end of 2016.