Sweden Government Calls for Dialog on Riksbank FX Interventions

Sweden’s government called on the central bank to consult with politicians before embarking on any concrete plans to intervene in the currency, as it’s unclear how far-reaching its mandate for interventions is.

“If they have concrete plans I think it’s good to inform” politicians “and provide an opportunity for response,” Financial Markets Minister Per Bolund said in an interview in Stockholm Wednesday. “We have a tradition of trying to have a dialog when important decisions are made and I think it’s important that we do that also in this situation.”

A debate has engulfed Sweden about the scope for Riksbank krona intervention after the bank last month stepped up threats it may try to weaken the krona to boost inflation, which has trailed its 2 percent target for five years. 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.

The debate about the Riksbank’s scope to intervene follows a review of Swedish monetary policy, co-written by former Bank of England Governor Mervyn King, which called for the law to clarify “the division of responsibility between the government and the Riksbank on matters of exchange-rate policy.” Governor Stefan Ingves, who will announce the next policy move on Thursday, last week tried to clarify any uncertainties by saying that the current law gives him unlimited scope to intervene for monetary policy purposes.

But according to Bolund, the law is unclear on how far the Riksbank’s mandate stretches. “There are a few questions marks,” he said. “All details aren’t crystal clear.”

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