In a press release today, the Riksbank announced that it has taken "the decision required to be able to instantly intervene on the foreign exchange market if necessary, as a complementary monetary policy measure". In practise the intervention decision has been delegated to Governor Ingves and First Deputy Governor af Jochnick.

The Riksbank concludes that "Swedish krona has appreciated against most other currencies. If this development were to continue, it could jeopardise the ongoing upturn in inflation". The Riksbank emphasises that it "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." Rate cut, additional QE and lending facility to companies are mentioned.

The Excutive Board was split as Deputy Governor Flodén entered a reservation against the decision, which was expected. Flodén has expressed doubts over FX-interventions and argues that "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".

Today's decision followed the Riksbank's press release 30 December in which Ingves expressed concern over the exchange rate movements. All in all, the Riksbank continues to focus strongly on the 2% inflation target, and the bank will not allow any SEK appreciation to hinder the upturn in inflation. Obviously, the Riksbank is ready to take more action and FX-interventions seem to be the next step.

There will be no more stimulus measures. However, recent developments have definitely increased the probability for more action from the Riksbank, not least as there is an imminent risk that the SEK will appreciate from here. The EUR is probably in focus. The level of EURSEK that the Riksbank can accept is probably not far from the 9.15 that was traded just before the Riksbank's press release today. Whether the Riksbank will just prevent the EURSEK from appreciating further or if it will push it to weaker (higher) levels is difficult to say. Nevertheless, if the EURSEK goes below say 9.05 near term, then FX-interventions will probably become a reality.