Swedish Krona Still Historically Weak, Riksbank’s Jansson SaysJohan Carlstrom
Sweden’s krona is still historically weak and no threat to the export-reliant economy, central bank Deputy Governor Per Jansson said.
“It’s very difficult to paint a picture” where “the krona is so strong that we will soon die,” he said in a speech today in Stockholm. “In a long-term perspective it’s rather relatively weak.”
Swedish policy makers yesterday cut their inflation forecast and pushed back interest rate increases until late next year amid a strengthening krona and a failure by companies to pass on higher labor costs through price increases. The krona has gained about 7.6 percent against the euro since May.
Central bank Governor Stefan Ingves said in an interview yesterday that a rate cut is not in the cards, as the bank will seek to ensure monetary policy doesn’t fuel household credit growth, comments that were underscored by Jansson.
“It’s reasonable to take into account that households’ indebtedness is high and is expected to rise further,” Jansson told reporters after the speech. “It then acts as a brake on what we can do with the repo rate.”
The Riksbank yesterday raised its forecast for household debt, which has almost doubled since 1996, to 177 percent of disposable income in the first quarter 2015. It cut its inflation forecast for this year to 0.1 percent from 0.4 percent at its previous meeting in February.
The bank has cut its repo rate four times since December 2011 to boost flagging growth in the economy, which exports about half of its output. About 70 percent of sales abroad are bound for Europe where countries are cutting spending to reduce debt.
“We’re already conducting an extremely expansive monetary policy,” Jansson said.