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Repeats Story Initially Transmitted at 08:00 GMT Jul 3/04:00 EST Jul 3
--Riksbank Monetary Policy Left On Hold
--Dissents On Rate Path, FX Regime From Floden, Ohlsson
By David Robinson
     LONDON (MNI) - The Riksbank Executive Board voted to extend its emergency
foreign exchange intervention regime Tuesday, leaving sole control with the
Governor and First Deputy Governor, also choosing to leave monetary policy
     The Riksbank left its forecast for the repo rate unaltered, indicating
"that slow repo rate rises will be initiated towards the end of the year," but
there were two dissents on the six person board, from Martin Floden and Henry
     For now, the Riksbank is only moving slowly back towards policy
normalisation and has passed up the chance to drop its extraordinary FX regime.
     Ohlsson voted for an immediate 25 basis point rate hike, which would have
taken the policy rate to -0.25%, while Floden wanted the path to indicate a rate
hike in September or October, rather than towards the end of the year.
     One, more surprising, development was that the Executive Board voted to
extend the mandate under which Riksbank Governor Stefan Ingves and First Deputy
Governor Kerstin af Jochnick have the power, if time is short, to authorise FX
intervention before consulting the board. 
     Removing that power would have been a signalling device -- a step along the
road to policy normalisation.
     Back at the start of 2016 the perception at the Riksbank was that the power
was needed to demonstrate its intent to tackle ultra-low inflation and its
commitment to its inflation target. The message was that FX intervention could
be authorised at any time to push down the krona and drive inflation higher.
     The power has not, however, been used and Floden and Ohlsson registered
their dissents against the regime but they failed to sway their colleagues and
with the power expiring July 2 the board renewed it.
     "The krona has weakened in the past year. But in the years ahead, it is
expected to strengthen and the exchange rate remains a source of uncertainty as
regards the development of inflation. An excessively rapid appreciation of the
krona would make it more difficult to stabilise inflation," the policy statement
     On monetary policy Ohlsson's dissent was expected. He told MNI in a recent
interview that it was natural to tighten policy with inflation around target and
economic activity elevated and he argued that there was no need to wait for wage
inflation to accelerate, as that could lag.
     Floden is also on board for an early hike, with the statement saying he
"advocated a repo rate path that indicated an initial increase of the repo rate
by 0.25 percentage points in September or October this year but that coincided
with the report's repo rate path as from the third quarter of 2019."
     The majority on the board, however, opted to signal a hike only at the tail
end of this year.
--MNI London Bureau; tel: +44 203-586-2223; email:
MNI London Bureau | +44 203-865-3812 |