The krona’s appreciation risks hampering the Swedish central bank’s efforts to keep inflation around its 2 percent target, Deputy Governor Karolina Ekholm said.
It’s “not good” if the krona slows inflation below the Riksbank’s forecasts, Ekholm told reporters in response to questions in Stockholm today.
The krona is the best performer in the Bloomberg Correlation-Weighted Index that tracks 10 developed-nation currencies, having risen 5.5 percent this year. Danske Bank A/S estimates the gains are likely to continue as central bank Governor Stefan Ingves and Finance Minister Anders Borg reassure investors they won’t be dragged into currency wars to boost trade competitiveness.
Swedish consumer prices fell 0.2 percent in February from a year earlier, the statistics office said yesterday. Underlying inflation, which takes the impact of mortgage costs into account, was 0.9 percent, it said.
Should the krona “move in a way so that inflation is pushed down further, well, then that’s worrisome,” Ekholm said. “I’m not saying that’s something that necessarily demands a monetary policy response, but it would be more on the cards then.”
Ekholm, who has repeatedly voted for lower rates than those delivered by the bank, today reiterated calls for more monetary easing to help support Sweden’s labor market. Some of the country’s biggest exporters have urged the central bank to cut rates further, arguing the impact such a move would have on the exchange rate would boost trade competitiveness.
The Riksbank last month kept its benchmark repo rate unchanged at 1 percent after cutting it four times over the previous year to boost Sweden’s export-reliant economy. The bank will announce its next rate decision on April 17. Ekholm last month voted against the majority on the six-member Riksbank board, arguing for a cut to 0.75 percent.