As Stocks Plunge, Swedish Central Bank Holds Extraordinary Meeting, Says Will "Instantly Intervene" If Necessary

Markets have started 2016 with a healty 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."

This is what else it said:

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. 

Comments

[orangegeek]

Sweden needs to import MOAR terrorists.  Will solve everything.

[patrickhenry61]

What's all the hub-bub? The way the stocks are rigged, it can drop 2 thousand points in one day, then by the next 2 days it's up 3 thousand. And then all the girls and cross dressers at CNBC shout for joy as to what was all the crying about.  There is SO MUCH money in it, primarily from the Feds, that it can never crash big time. And I'm sure the Feds still send money to their boys in Goldman Sachs so they won't lose any money, using that money to play the markets. It's all a racket. Even Al Capone, back in the day, trie to steer people away from the markets before the big crash, telling them, "It's a racket!" Go figure that one out! 

[Soul Glow]

I bet they were intervening while they said they would intervene if necessary.

[Lucky Leprachaun]

Why worry?  Surely those wonderful entrepreneurial hard-working and innovative Pakistanis, Afghans and Africans swarming in will sort everything out?  That's the impression I get listerining to Swedish politicians  anyway.  Make that politicians everywhere.

[LawsofPhysics]

LOL!!!  In other words; "Man the printers! Protect the assets and wealth of the 1%!!!"

Same as it ever was.

[homebody]

All countries now mobilizing their plunge protection teams - got to keep that damn balloon up for a few more months till the rulers get out from under.

[Contrariologist]

...as if the new rulers will be any different? Not a chance.

[Loucleve]

protect the rate of inflation.  isnt it strange how things have changed over the years.

I LOVE DEFLATION.

i should go into the sticker business.

[GRDguy]

Wallenberg's just tryin' to protect his pocketbook.

[Contrariologist]

We have truly crossed over into Crazy-Land. There is just no way to know how to plan for the future, since the absolute nutballs are running the financial show. Fundamentals are DEAD. Common Sense is DEAD. Fairness and honest markets are DEAD.

Cash is no safe haven...they might ban that. Gold? Might work for a while. This is insanity..."protect inflation"...I mean, truly, WTF?

[CTG_Sweden]

The Swedish Central Bank will probably continue to pursue the current depreciation/inflation strategy for at least a couple of years. The Swedish parliament will probably not change the 2 % inflation target for the Central Bank. The reason is that they want to doctor the unemployment figures by making exports less expensive and imports more expensive. This is also the most realistic strategy if you intend to let more people share the same basic export revenues. If more people have to share the same amount of export revenues you got to make imports more expensive so that people can´t afford the same amount of imports. You can adjust the exchange rate in advance just like the Swedish Central Bank does or just let it happen later on when the markets discover that the Swedish trade balance is deteriorating.

I also guess that the Swedish stock market, at least the big export sector companies, will benefit from a depreciating (or not appreciating) Swedish krona. But it will be bad for people holding lots of cash. Some senior citizens will suffer.

I´m not sure for how long the Swedish Central Bank will be able to keep interests as low as they are now. Larger public deficits, borrowing huge amounts abroad for giant housing projects and an expected depreciation of the Swedish krona should make the interest rates climb later on.