STOCKHOLM--The governor of Sweden's central bank said Wednesday that the recent global financial crisis has shown monetary policy needs to play a greater role in maintaining financial stability.
"A lesson learned from the crisis...is that price stability does not suffice to achieve financial stability too," Riksbank chief Stefan Ingves said in a speech in Stockholm Wednesday.
"Monetary policy should therefore take account of financial stability aspects to a greater extent than before," he said.
Mr. Ingves's comments follow earlier statements he has made about the Riksbank's need to consider rising levels of household debt in Sweden when setting the main interest rate level.
Despite slowing growth and low inflation, Mr. Ingves has resisted calls from unions and industry representatives for lower interest rates.
The central bank governor has been concerned lower rates could lead to higher levels of household borrowing which could in turn leave borrowers vulnerable if house prices then fall or interest rates rise.
Alongside the use of interest rates, Mr. Ingves said other tools--such as a cap on the level of a mortgage relative to the value of a home being bought--have a role in strengthening the resilience of the financial system.
Such so called macroprudential tools "also affect the impact of monetary policy, and enable managing the risks to the inflation target and economic activity brought about by a financial crisis better than is the case today," Mr. Ingves added.
He repeated his view that the Riksbank is in a good position to take on the responsibility for macroprudential policy in Sweden. The Riksbank has extensive capabilities in terms of analysis of systemic risks and the links between the financial and the real sector, he said.
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"A lesson learned from the crisis...is that price stability does not suffice to achieve financial stability too," Riksbank chief Stefan Ingves said in a speech in Stockholm Wednesday.
"Monetary policy should therefore take account of financial stability aspects to a greater extent than before," he said.
Mr. Ingves's comments follow earlier statements he has made about the Riksbank's need to consider rising levels of household debt in Sweden when setting the main interest rate level.
Despite slowing growth and low inflation, Mr. Ingves has resisted calls from unions and industry representatives for lower interest rates.
The central bank governor has been concerned lower rates could lead to higher levels of household borrowing which could in turn leave borrowers vulnerable if house prices then fall or interest rates rise.
Alongside the use of interest rates, Mr. Ingves said other tools--such as a cap on the level of a mortgage relative to the value of a home being bought--have a role in strengthening the resilience of the financial system.
Such so called macroprudential tools "also affect the impact of monetary policy, and enable managing the risks to the inflation target and economic activity brought about by a financial crisis better than is the case today," Mr. Ingves added.
He repeated his view that the Riksbank is in a good position to take on the responsibility for macroprudential policy in Sweden. The Riksbank has extensive capabilities in terms of analysis of systemic risks and the links between the financial and the real sector, he said.
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