Swedish Cbank shows how to fight asset bubbles

Sweden’s central bank may set the direction for other policy makers as it looks beyond conventional inflation targets to asset-price growth in an effort to prevent the next bubble.

“Not countering asset-price increases has been the conventional wisdom among central banks, but what has it actually resulted in?” said Tina Mortensen, an economist at Citigroup Inc. in London. “Surely the current crisis has made central bankers rethink policy; Sweden is actually facing this problem” because “asset prices and monetary policy are a hot topic,” she said.

Riksbank Governor Stefan Ingves has raised the repo rate four times since July even as inflation remains below the bank’s 2 percent target. The increases occurred as house prices move above pre-crisis levels and credit growth hovers near 9 percent. While Sweden raises rates, the U.S., the euro region, Japan and the U.K. are keeping borrowing costs at record lows.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.