Swedish Finance Minister Anders Borg said businesses in the largest Nordic economy need to accept the krona’s recent appreciation as he predicts the currency will stay strong for a “couple of years.”
The remarks follow yesterday’s decision by the central bank not to give in to calls to lower interest rates even as some exporters argue the krona’s gains are eroding competitiveness. Governor Stefan Ingves said the currency’s ascent has brought it to an appropriate level.
“One has to get used to that Sweden has a strong currency in the next couple of years,” Borg said today in Malmoe, Sweden. “You shouldn’t expect to mitigate some of your production costs from currencies.”
The krona rose 0.3 percent against the euro to trade at 8.4335 as of 4:11 p.m. in Stockholm. The gains brought the currency to its strongest versus the euro since Oct. 1. It had traded down 0.1 percent before Borg spoke today.
Sweden has distanced itself from talk of manipulating exchange rates as policy makers across the globe shift their attention from indebtedness to trade competitiveness. Talks aimed at preventing currency interventions look set to dominate a meeting of Group of 20 finance ministers in Moscow over the weekend. Sweden gets half its output from exports, about 70 percent of which go to Europe.
Manufacturers shouldn’t rely on currency devaluations to boost their competitiveness, Borg said. He reiterated his readiness to deploy stimulus measures should Sweden’s economy need it.
“We live in a volatile world, we’re small and we’re an open economy, and Sweden is more exposed than most others, as we have our own currency, which adds to the insecurity,” Borg said. “That was more common in the past, while now we have large currencies all around.”
Ingves yesterday left the Riksbank’s benchmark interest rate at 1 percent. Nine of 22 economists surveyed by Bloomberg had predicted the bank would cut its rate by a quarter of a percentage point.
The Riksbank is committed to its inflation target and will accept the shifts in the krona exchange rate that the market delivers, Ingves said yesterday. The bank’s main rate is a quarter point higher than the European Central Bank’s benchmark. Main rates in the U.S. and Japan are close to zero.
“Anything we can do to help stabilize the economy is good,” Borg said. “We can make sure we have price stability, so we don’t have to worry about prices affecting costs. We can make sure we have strong fiscal balances. We can make sure we have stable banks and a financial sector that doesn’t build up bubbles.”