The weakness of the Swedish krona may become a serious problem and a further weakening would have a direct effect on the Riksbank’s monetary policy decisions, Deputy Governor Per Jansson said.
(Bloomberg) — The weakness of the Swedish krona may become a serious problem and a further weakening would have a direct effect on the Riksbank’s monetary policy decisions, Deputy Governor Per Jansson said.
As the Nordic currency is trading close to its weakest level ever versus the euro, Riksbank board members are concerned that it will hamper their efforts to rein in inflation as imported goods become more expensive.
“This has been a trend over a long period of time and that cannot continue,” Jansson told reporters after a speech in Stockholm. “It is impossible to quantify at what point, but sooner or later it will become an important factor for inflation and then it would cause a problem for monetary policy.”
His comments echo a growing discontent among policymakers at the world’s oldest central bank over the currency’s performance. Last week First Deputy Governor Anna Breman said the bank should consider expanding asset sales announced in February. Jansson said that divesting more bonds is one of two tools the bank has at its disposal, in addition to the policy rate, while intervention in currency markets should be seen as a “last resort” that should only be considered in exceptional situations.
“Interventions is something that I actually dislike,” the deputy governor said. “There are also considerably questions to be raised about how effective interventions are. It can get very costly while bringing very limited benefits.”
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