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FX PilotCommunication problems at the Riksbank

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As expected, the Swedish Riksbank last week decided to push back its forecast for a first hike of the policy rate. Finally, the rate-setting board also gave the impression of no longer worrying about a strengthening krona. In the press release following its latest monetary policy meeting, the Riksbank board changed the wording on the krona from "important that the krona does not appreciate too quickly" to "important that the krona exchange rate develops in a way compatible with inflation stabilising close to the target". Their stance also changed from being prepared to "implement further monetary policy easing" to being "prepared to adjust monetary policy". In combination with a very bullish SEK forecast, this makes us think that the Riksbank has had enough of SEK weakness and even wanted to prevent further depreciation. However, something appears to have gone very wrong.

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Lars Henriksson

Strategist

Foreign Exchange

lahe06@handelsbanken.se

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