The Swedish central bank said on Monday it stood ready to intervene in currency markets to stem the rise of the krona. Following an extraordinary monetary policy meeting, the Riksbank said the krona's appreciation was a threat to its efforts to kickstart Swedish inflation. The Riksbank pushed its key interest rate into negative territory to -0.35 last year in a bid to bring annual consumer price rises back to its 2 percent target.
"However, since the last monetary policy meeting in mid-December, the Swedish krona has appreciated against most other currencies. If this development were to continue, it could jeopardise the ongoing upturn in inflation," the Riksbank said in a statement. Unlike the inflation rate, the Riksbank has no exchange rate target for the krona, "but the krona's value in relation to other currencies is an important factor in the inflation forecast". All things equal, a rising currency counters inflationary pressures as imports become cheaper.
"To safeguard the role of the inflation target as benchmark in price setting and wage formation, it is therefore important that inflation continues to rise," it said. The Riksbank also warned that if currency market intervention was not sufficient, it would implement other measures to prompt prices to rise. A further cut in the key repo rate, purchases of securities and lending to companies via the banking sector were all on the cards, it said.
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