Stefan Ingves: Low repo rate supports upturn in inflation
"Last month we took an unusual decision - to cut the repo rate to the historically-low level of -0.10 per cent and to purchase government bonds for SEK 10 billion." This comment is made by Governor Stefan Ingves, speaking at Bank & Finans Outlook on Wednesday morning. "We are showing through our actions that we support the upturn in inflation. The measures we have taken, and which can be extended if necessary, are an insurance against the risk of lower inflation and lower inflation expectations."
But Mr Ingves also points to the risks linked to having low interest rates over a long period of time. When housing prices and household debt continue to increase, this threatens both the development of the real economy and financial stability. "We urgently need to slow down indebtedness. There are several possible measures to deal with these problems, which would supplement the measures already implemented, such as reducing the tax deduction for interest, extending the mortgage cap with a so-called debt ratio ceiling, limiting the percentage of mortgages at flexible interest rates, extending taxation on housing and in general promoting better functioning of the housing market," says Mr Ingves.
"The risks have been increasing over a long period of time. Now indebtedness is showing signs of increasing faster again. It is extremely important that the discussion of how we manage the risks linked to household debt continues - and that other policy areas deal with them;" concludes Mr Ingves.
Follow the link to see the slides Mr Ingves shows during his presentation at Bank & Finans Outlook.
