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One step at a time for the Riksbank

Despite the Riksbank reopening the door to a 50bp cut at its last meeting, we think it will proceed gradually and cut by 25bps next week to 3.0%. This is because the policy rate is approaching the neutral rate and the risks of over loosening are particularly high in Sweden due to the interest rate sensitivity of consumption. Looking further ahead, we maintain our view that the terminal rate will be 2.5%.

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