Source - Zero Hedge
Markets
have started 2016 with a healthy dose of turmoil, and so many were
wondering how long - and who - would be the first central bank to
intervene in either directly or verbally in markets.
Moments ago we go
the answer when Sweden's Riksbank announced it has held an extraordinary
monetary policy meeting in which it took the decision required to be
able to "instantly intervene on the foreign exchange market if
necessary, as a complementary monetary policy measure, to safeguard the
rise in inflation."
The decision
involves the Executive Board entrusting to the Governor, together with
the First Deputy Governor, the task of deciding the details with regard
to possible interventions.
During 2015, the Riksbank has cut the
repo rate to –0.35 per cent, adjusted the repo-rate path downwards and
purchased large amounts of government bonds and also announced
additional purchases during the first half of 2016. However, since the
last monetary policy meeting in mid-December, the Swedish krona has
appreciated against most other currencies. If this develop-ment were to
continue, it could jeopardise the ongoing upturn in inflation.
The
Riksbank has no target for the exchange rate, but the krona's value in
relation to other currencies is an important factor in the inflation
forecast. Inflation is rising but has been under the target of 2 per
cent for a relatively long period of time. To safeguard the role of the
inflation target as benchmark in price-setting and wage formation, it is
therefore important that inflation continues to rise.
The
Riksbank still maintains a high level of preparedness to take other
monetary policy measures in addition to the currency interventions if
this is necessary for inflation to stabilise around 2 per cent. The repo
rate could be cut further, the securities purchases could be extended
and the Riksbank could lend money to companies via the banks.
Deputy
Governor Martin Flodén entered a reservation against the decision. He
thought it appropriate to wait before implementing any further monetary
policy stimulation and did not consider currency interventions to be a
suitable tool to make monetary policy more expansionary in the current
situation.
And now, we sit
back and wait for some of the "real" central banks to follow suit
because this aggression against manipulated asset prices will surely not
stand.
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