BofA Global Research's Analysis on Riksbank and Norges Bank

BofA Global Research's recent note indicates a more hawkish outlook for Sweden's central bank, Riksbank, contrasting with Norges Bank's balanced approach and its guidance for a potential rate cut in March.

Key Points:

• Riksbank's rate cut to 2.50% was anticipated.
• 2025 monetary policy guidance from Riksbank appears more hawkish, projecting only one additional cut in the first half of 2025.
• BofA considers Norges Bank's core inflation forecasts for next year to be more realistic, but still anticipates a pace of quarterly rate cuts starting in March, with risks tilted towards fewer cuts.

FX Market Insights:

• BofA acknowledges the strength of the SEK but views it as overvalued.
• The firm predicts an increase in the NOK-SEK exchange rate, with both currencies susceptible to external influences, including tariffs.
• Relative monetary policy is expected to push NOK-SEK higher, but valuations for NOK and SEK against the euro are deemed low or fairly balanced.

> "Riksbank aside, SEK strength seems overdone to us," BofA stated in its note.

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