The value of the Swedish krona has dropped steadily against the euro since summer 2021, hitting its weakest value since the beginning of 2009 on Wednesday.
A euro now costs 11:49 kronor, up from around 10 kronor in summer 2021. This means the krona has lost around 15 percent of its value against the euro in just under two years.
Discounting the 2009 valuation – which was a short-term dip – the value of the krona has never been lower than it is now.
At the same time, one dollar costs 10:66 kronor, which has remained relatively stable. In March one dollar cost over 10:70 kronor, and last autumn one dollar would have cost you 11:40 kronor.
Sweden's central bank hiked the key interest rate on Thursday by 0.25 percentage points from 3.75 to 4 percent, while flagging that further rate hikes are likely.
This is the eighth interest rate hike in a row, and was broadly expected by Swedish banks and financial experts. Sweden’s key interest rate has not been this high since October 2008.
The bank also warned in a statement that Thursday’s interest rate hike may not be enough to curb inflation, and that more hikes are likely.
According to its prognosis for the coming years, the bank expects the average key interest rate to hit 4.03 percent in the last quarter of 2023 and 4.10 percent by the third quarter of 2024, before dropping slightly to 4.04 percent by the third quarter of 2025.
It expects the average key interest rate to dip under the 4 percent mark in 2026, with an average rate of 3.69 percent in the third quarter of that year.
The bank also believes that the krona is undervalued.
“At the moment, the krona is undervalued,” it wrote in a separate statement. “Economic developments in Sweden relative to other countries suggest it will begin to gain value in the future, although it is difficult to predict how much and when.”
It believes that the krona’s weakening may be due in part to speculators, adding that this means that the krona’s value “could strengthen relatively quickly once this situation turns around.”
Having said that, it believes that the primary factor behind the weakening of the krona is differences in interest rates between the USA and other central banks.
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Half baked financial measures produce results like this