Perspectives on the krona, inflation and monetary policy

Economic Commentaries, News It is challenging to sort out what drives the exchange rate and what the exchange rate means for inflation and monetary policy. In the Economic Commentary “Perspectives on the krona, inflation and monetary policy”, the authors use the Riksbank’s own forecasting experiences to illustrate and discuss this.

The Riksbank’s forecasts have not predicted the krona depreciation of recent years and the krona developments have not been easy to explain, even in retrospect. In light of recent years’ forecast errors, the Riksbank has opened a review of the methods used to analyse the development of the krona.

In this Economic Commentary, the authors use the Riksbank's forecasting experiences to discuss the difficulties of explaining and making forecasts of the development of the krona exchange rate. The authors also provide perspective on the relationships between the krona, inflation and monetary policy in a monetary policy framework with inflation targeting.

By Carl-Johan Belfrage, Vesna Corbo and Stefan Ingves. Ingves is Governor of the Riksbank, Belfrage and Corbo work in the Monetary Policy Department.

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Updated 04/12/2019