BRUSSELS (MNI) – Policy-makers need to find other instruments than
interest rates to keep asset prices under control, Norges Bank Governor
Svein Gjedrem said, according to the text of a speech released on
Thursday.
“Interest rate policy targets the inflation rate, and cannot always
be set as would be appropriate for asset prices,” Gjedrem told a
conference in Oslo.
“There might be conflicting targets” if the inflation rate was used
to limit rising asset prices,” he said. “We should thus be looking for
new instruments.”
Policy-makers around the world are looking for ways to keep asset
prices in check after booming prices of some assets, for example, house
prices in Ireland and the UK, fell back rapidly in the financial crisis.
The Norges Bank governor said instruments that could be used to
limit asset prices include loan-to-value or loan-to-income limitations
and add-ons to the risk weights on relevant bank exposures.
“The latter instrument is being used in New Zealand, where
supervisors have recently introduced a 15 percentage point risk weight
add-on to property lending,” Gjedrem said.
But he said these instruments were microprudential, rather than
macroprudential, and it was therefore not clear whether they should fall
in the domain of the central bank or the financial regulator.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
[TOPICS: M$$EC$,M$X$$$,M$$CR$,MGX$$$]
