Nov. 17 (Bloomberg) -- Sweden’s central bank should focus on stabilizing inflation and not broaden its mandate to include using interest rates to steer financial stability, Deputy Governor Lars E.O. Svensson said.
“Confusion risks leading to a poorer outcome for both policies and makes it more difficult to hold the policymakers accountable,” Svensson said in a speech published today on the Riksbank’s website. Focusing on inflation targeting will aid transparency, he said.
The Riksbank, which last month left rates unchanged and said it will scale back plans to tighten as Europe’s debt crisis deepens, had earlier in the year cited rising house prices and credit growth as triggers that may warrant higher rates. Riksbank Governor Stefan Ingves, who is also the chairman of the Basel Committee on Banking Supervision, said in a Nov. 10 speech the bank will do “all it can” to promote a stable economy.
If the housing and credit markets were out of balance, “the policy rate is a blunt and ineffective instrument to influence them and will have negative consequences for inflation and resource utilization,” Svensson said.“ There are other instruments, such as the mortgage ceiling and stricter loan terms, that are more effective.”
Swedish house price gains came to a halt in the three months through October amid signs of slowing economic growth, the statistics office said today.
The central bank last month left the benchmark repo rate unchanged at 2 percent for a second month, after raising it seven times since July 2010.
--Editors: Tasneem Brogger, Jonas Bergman.
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