- Says analysis needed on how framework should be designed
- Says everyone agrees rate decisions taken independently
Sweden’s government is open to looking into the framework over who controls the currency of the largest Nordic economy after the central bank warned last month it may start intervening amid a battle to revive inflation.
The debate was thrown open this week after a review of Swedish monetary policy co-written former Bank of England Governor Mervyn King said there was a need to make clear in the Riksbank law that any decision on the exchange rate regime “is a matter for government.”
“We choose not to comment on the rate decisions at all, everyone agrees that those decisions are taken independently by the Riksbank, without political influence,” Financial Markets Minister Per Bolund said in a phone interview on Thursday. “But when it comes to currency interventions, the situation is not as clear and there may be need for a discussion and analysis of how the framework should be designed.”
The review, which also recommended greater flexibility for inflation targeting, comes as the central bank warned last month that it stands ready to intervene in the currency market. The bank is digging deeper into its toolbox to revive inflation, after also cutting rates far below zero and unleashing an unprecedented bond purchasing program. Swedish inflation has hovered near zero for more than three years.
The krona has weakened about 1.3 percent against the euro since the Riksbank’s Dec. 30 warning it was moving closer to intervening. It jumped 0.5 percent on Thursday after the European Central Bank signaled it stands ready to provide more stimulus.
The krona gained 0.3 percent to 9.2818 per euro as of 8:14 a.m. in Stockholm.
King said on Tuesday at a press conference that regarding currency interventions what happened in Switzerland, which was forced to abandon a cap on the franc, is “a cautionary tale.”