STOCKHOLM--The minutes of the Swedish central bank's most recent monetary policy meeting show the executive board continues to be ready to react if inflation doesn't develop as forecast, with a blend of interest rate adjustments, bond purchases and, possibly, currency interventions.
The central bank, known as the Riksbank, lowered its policy rate to minus 0.35% in the July meeting, from minus 0.25% where it had been since March. It also increased government bond purchases by 45 billion Swedish kronor ($5.28 billion) as it fights to get stubbornly low inflation up to its 2% target amid lackluster world trade, lingering global geopolitical uncertainty and weak government finances among many eurozone countries.
In the minutes, released Wednesday, Riksbank Governor Stefan Ingves said that in today's uncertain world, it is difficult to tell which combination of monetary policy measures is the most suitable but "it is a question of combining interest rate adjustments, bond purchases as well as, potentially, currency interventions."
The bank has been concerned that a stronger Swedish currency could slow demand and see prices of imported goods increase more slowly, putting at risk any upturn in inflation. First Deputy Governor Kerstin af Jochnick said limited tolerance should be shown if the krona strengthens too quickly. A rapid appreciation of the krona would not be welcome."
The Riksbank reiterated that it still has a high level of preparedness to make monetary policy even more expansionary if necessary, even between the ordinary monetary policy meetings.
Inflation in Sweden hasn't hit the 2% target since December 2011 and fell to minus 0.4% in June, from 0.1% in May.
Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @WSJNordics
(END) Dow Jones Newswires
July 15, 2015 05:51 ET (09:51 GMT)
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