BoJ and Riksbank in focus this week – BBH

Research Team at BBH suggests that the Bank of Japan and Sweden's Riksbank hold policy meetings and there is potential for both central banks to surprise the consensus, which is looking for unchanged policies. 

Key Quotes

“The surprise could come from the BOJ in the form of tweaking its goals.  Its new declaratory goal is to keep the 10-year yield near zero.  It has crept up to 10 basis points at the end of last week.  It had intervened in the longer-end of the curve, according to reports, and this seemed to yield favorable results.  The 20-year bond yield reached 68 bp on December 13 and following BOJ efforts; the yield finished the week 10 bp lower.” 

“Most expect the Riksbank to leave its deposit rate at minus 0.50%.  The central bank put investors on notice in October that the probability of a rate cut had increased.  However, of the 16 "qualified economists" in the Bloomberg survey, only one expects a cut now.  The idea is that the Riksbank may not be in such a hurry to deliver a rate cut.  Deflation forces have not only been beaten back, but price pressures are accelerating.  The 1.4% year-over-year pace in November contrasts with the 0.5% pace at the end of last year.  The CPI measures that adjust for fixed rate mortgages rose to 1.6% in November from 0.9% at the end of 2015.”