SwedenÃ¢â‚¬â„¢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.
Ã¢â‚¬Å“Not countering asset-price increases has been the conventional wisdom among central banks, but what has it actually resulted in?Ã¢â‚¬Â said Tina Mortensen, an economist at Citigroup Inc. in London. Ã¢â‚¬Å“Surely the current crisis has made central bankers rethink policy; Sweden is actually facing this problemÃ¢â‚¬Â because Ã¢â‚¬Å“asset prices and monetary policy are a hot topic,Ã¢â‚¬Â she said.
Riksbank Governor Stefan Ingves has raised the repo rate four times since July even as inflation remains below the bankÃ¢â‚¬â„¢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.
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