Hedging the Risk for Higher Inflation

SEB expects the Riksbank to maintain a 1.75% policy rate in June, despite softening GDP and labor market data, due to concerns over inflation risks stemming from the Strait of Hormuz crisis. The central bank is projected to signal a slightly higher rate path while delaying the first rate hike until late 2027.

Key Takeaways

• 1.SEB expects the Riksbank to keep the policy rate unchanged at 1.75% in June while signaling a slightly higher rate path.
• 2.Upside inflation risks from the Strait of Hormuz crisis and the Iran war are expected to outweigh weak domestic labor and growth data in Riksbank deliberations.
• 3.The first Riksbank rate hike is forecasted for the end of 2027.

Table of Contents

• Key points
• Policy conclusions
• The Board refrained from clear policy signals in May
• Lower inflation and disappointing growth
• Government measures offset higher energy prices
• Weaker growth in Q1 and still no clear signs of a stronger labour market
• Expected Riksbank forecasts on 17 June