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Housing prices and mortgages do not comprise stability problems and should not affect monetary policy, Riksbank Deputy Governor Lars Svensson said Wednesday.
"Any future problems on the housing markets, or, indeed, any future problems with financial stability whatsoever, can best be managed through regulation and supervision," Svensson said in a speech.
According to him, the repo rate is an altogether too blunt and unsuitable instrument to be used for any other purpose than stabilizing inflation around the inflation target and resource utilization around a normal level.
On February 11, the Swedish central bank held its key interest rate at 0.25% and said it will begin to raise the repo rate in the summer or early autumn.
Minutes of the monetary policy meeting showed today that Svensson entered a reservation against the decision and advocated cutting the repo rate to 0% and a repo rate path 0.25% below that in the main scenario until the end of the fourth quarter of 2010.
He said the lower repo rate path he advocated would provide a better outcome for both inflation and resource utilization. "Such an interest rate path would not entail any problems for financial stability or the functionality of the financial markets," he said.
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