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.
