FRANKFURT (MNI) – Swedish exports could be at risk if investors
continue to see benefits in pouring capital into the Swedish economy,
Riksbank Governor Stefan Ingves warned Thursday.
The Governor told the country’s parliament that it “cannot be ruled
out that the favourable development of the Swedish economy has led many
investors to reappraise their view of investing money in Sweden.”
He asked rhetorically if an “excessively strong exchange rate”
could pose a problem for the Swedish economy. “Yes, it may form a
‘problem’ in so far as demand for Swedish exports will decrease and
inflation may not increase in line with expectations, as imported goods
become cheaper.”
“Should this be the case, it may not be necessary to increase the
repo rate as rapidly,” Ingves concluded.
Still, the Riksbank chief underscored that the central bank does
not have an exchange rate target. “Monetary policy is governed by the
inflation target, even if the exchange rate is an important determining
factor for inflation.”
The strong krona has, however, “to a certain extent” been able to
cushion the rise in commodity prices, he explained. But on balance, the
rise in commodity prices “may have greater contagion effects” on prices
in the Swedish economy than previously estimated.
The Riksbank raised its main repo rate by 25 basis points at its
last meeting February 14. The rate currently stands at 1.50%. Its next
monetary policy announcement is April 20.
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