Riksbank Preview ~ Easing Further in August

Investment Rating - The report indicates a forecast of three more rate cuts in 2024 and one additional cut in 2025, leading to a terminal rate of 2.75% [4][8]. Core Insights - The Riksbank's Executive Board maintained the policy rate at 3.75% during the last meeting, with guidance suggesting potential cuts if inflation prospects remain favorable [4]. - Recent inflation data shows that July core inflation was 2.2% year-over-year, aligning with Riksbank's projections, while the activity picture remains subdued with a Q2 GDP decline of -0.8% quarter-over-quarter [5][7]. - The report anticipates a 25 basis point cut to 3.5% in the upcoming meeting, with expectations for further cuts in August, September, and November [8]. Summary by Sections Monetary Policy Outlook - The Riksbank's policy rate is projected to decrease to 3.33% in Q4 2024 and 2.94% in Q2 2025, reflecting a cautious approach due to global developments and economic activity slowdown [4]. - The majority of the Executive Board members are open to delivering three more rate cuts this year, citing favorable inflation prospects and a slowing economy [4]. Inflation Trends - Core inflation metrics have shown mixed progress, with July's core inflation at 2.2% year-over-year and a sequential increase of 0.37% month-over-month [5][6]. - The trade-weighted krona has remained stable since the June meeting, indicating a lack of significant volatility [6]. Economic Activity - The economic activity remains subdued, with a flash GDP print of -0.8% quarter-over-quarter for Q2, following a growth of 0.7% in Q1 [7]. - Unemployment rates have stabilized at 8.2%, and consumer confidence has shown signs of improvement, suggesting potential for economic recovery in Q3 [7].