Sweden's central bank is ready to act if the crown strengthens sharply and threatens the current uptick in inflation, central bank Deputy Governor Per Jansson said on Thursday.
Surging economic growth and three months where inflation has topped forecasts had encouraged analysts to think the central bank might take a more relaxed view about a firming currency and any fluctuations in the upturn in inflation.
But Jansson, part of the majority who voted to expand the central bank's bond purchase programme earlier this month, said the central bank remained on high alert.
"I am still very worried about the currency," he told reporters. "There is a discussion that the sell-by date for monetary policy has passed, that we have reached the end of the road. That is not a description of the situation that corresponds at all with how we see things."
The crown weakened after Jansson's comments.
The Riksbank held its benchmark rate unchanged at -0.50 percent this month and expanded its asset purchase programme, saying it could do more if the crown strengthened sharply. Still, the crown strengthened after the decision.
Though inflation is on the way up and - excluding energy and mortgage costs - is near the 2 percent goal thanks to ultra-loose policy, Jansson was clear the Riksbank had little room to rest on its laurels with currency intervention still an option.
"The stronger the currency gets, the greater the chance we reach that point where we need to do something," he said.
"The development has not been dramatic, but it has gone in the wrong direction."
Jansson said the Riksbank needed to "protect" Sweden against a rapid currency appreciation, which would press down inflation again and hit the economy.
"In regard to the currency, things can happen very fast and I am very mindful of what happened in February-March (last year) when the crown fell like a stone over four weeks," Jansson told reporters.
"If that happens, what we are seeing now with 4 percent growth etcetera, you can forget that. Then there will be a big problem."