Riksbank Governor Stefan Ingves said the weakening krona is not a “disadvantage” for the central bank’s inflation outlook.
“At the moment there’s nothing negative about” the krona weakening, he said today to reporters in Haernoesand, Sweden. “But at the same time I really want to emphasize with a flexible exchange rate you can never really know” what will happen next.
The krona has slid almost 2.7 percent since mid-April, when policy makers at the Riksbank in Stockholm delayed plans for a rate increase to late 2014, citing a strong currency. The currency’s gain has killed inflation, hampering the bank’s efforts to reach a 2 percent price growth target. Consumer prices fell on an annual basis in April and May.
The currency’s appeal as a haven from Europe’s turmoil has boosted the krona 7.8 percent over the past year, measured on a correlation-weighted basis, making it the best performer among 10 major currencies tracked by Bloomberg. The government has also stepped up its rhetoric after cutting its economic growth forecast as the gains hurt exports and jobs. Sweden generates half its economic output from exports, of which 70 percent are destined for Europe.
“The krona is roughly at the level one can expect,” Ingves said.
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