Monetary policies to diverge in small advanced economies with Riksbank in focus – Goldman Sachs

By FXStreet FXStreet (Delhi) – Research Team at Goldman Sachs, suggests that their monetary policy forecasts for the small advanced economies for which they provide forecasts are broadly in line with market pricing in 2016 and 2017, with some exceptions.

Key Quotes

“Our base case is for central banks to be on hold (we forecast no further cuts to policy rates or unconventional easing tools to be deployed) and to begin hiking rates at a different time and pace depending on the size of the countries’ output gaps, their exposure to emerging markets (EM), and the sensitivity of output and inflation to exchange rate fluctuations.”

“Based on our economists’ forecasts, the first central banks to begin tightening policy rates will be the Riksbank (2016Q4) and the Bank of Canada (2017Q1), and the last will be the RBA (2018Q1). Beyond 2017, our economists expect steeper money market curves than the forwards are pricing. In addition to specific country factors, this reflects our more bearish rates’ views than the market is pricing for the G4 countries.”

“From a strategy point of view, an economy that deserves our attention at this juncture is Sweden. Our Swedish economist expects the Riksbank to be the first of the central banks of …read more

Source:: FX Street