The article was intended to serve as a basis for public debate; in our opinion it provided the best foundation that was then available for discussing the krona’s long-term value. The krona’s equilibrium value is naturally something that the Riksbank considers continuously and the analysis is constantly being developed. Accounts of various aspects of the exchange rate have been presented in the Inflation Report. The material that will be produced in the event of Sweden deciding to participate in ERM2/EMU will have to incorporate the additional information since 1996. It should also be noted that the levels and intervals that were presented in the article refer to the krona’s trade-weighted exchange rate and are therefore not directly applicable to the question of a reasonable central rate for the krona against the euro. Furthermore, the euro is a new currency. Arriving at just the right future exchange rate for the krona against the euro is therefore not exactly easy. Although the financial markets are naturally eager to know, at this stage it is too early to allow the discussion of the krona’s path to focus on specific intervals or levels. But the course is clear—in the event of a euro peg, the rate for the krona will be stronger than the current level. Current monetary policy In conclusion I should like to say something about the monetary policy situation in Sweden. International economic prospects gradually deteriorated during 1998.
Mr Heikensten discusses the new currency and the Swedish economy Speech by the First Deputy Governor of the Bank of Sweden, Mr Lars Heikensten, before the Swedish Shareholders’Association in Sölvesborg, Bromölla, on 23/1/99. On New Year’s Day, ten currencies in Europe were replaced by a single, common currency. The changeover went well, no doubt exceeding some expectations. The elaborate systems that were used in earnest for the first time to transmit cross-border payments functioned properly, with no serious technical hitches. This made it possible to establish a uniform instrumental rate for monetary policy throughout the euro area. The new currency also had a favourable reception in financial markets, accompanied by falling interest rates. EMU has thus got off to a successful start. But the challenges posed by monetary union and any risks connected with the project are mainly of a different nature. They are economic and political, affecting the participants as well as non-euro countries. With eleven countries subscribing to a single monetary policy, the conditions for economic policy in Europe have changed. So have the terms for Sweden and economic policy here. These matters have not yet been discussed at all fully in Sweden. Under these circumstances, I shall be opening our debate today by touching briefly on four issues: the new challenges posed by the euro to economic policy in Europe; the consequences for Sweden; the path of the krona’s exchange rate; and current monetary policy. Challenges to EU economic policies The euro’s successful launch was underpinned by intensive preparations.