FRANKFURT (MNI) – One of the lessons of recent years is that too
much debt, whether it be in the household, corporate or public sector
comes back to haunt you, Riksbank Governor Stefan Ingves told the
Financial Times in an interview published Wednesday.

The governor of Sweden’s central bank also warned that in the
future central banks may have to intervene more aggressively in the
financial sector by extending the “punch bowl principle” into that area.

One of the lessons from the recent crisis in the Baltic states is
that the central bank could have been more outspoken and thus, probably
will be in future, he reckoned.

Ingves also cautioned that household debt in Sweden cannot keep
rising forever, though it does not pose a problem at present.

“One of the lessons from the past few years is that if there is too
much debt out there, in one form or another, be it in the household
sector, the corporate sector or public sector, that comes back to haunt
you,” he warned.

In the future, central bankers would have to “extend the punch bowl
principle into the financial sector and actually in some instance do
things while they still have not got out of hand,” he explained.

Sweden was hurt by the economic struggles of some Baltic states,
and the Riksbank had seen the risks of such a crisis, Ingves conceded to
the paper. “The lesson we have drawn is that, yes, we could have been
more outspoken, and probably should be more outspoken in the future.”

A rise in Sweden’s household borrowing from 40% of GDP in the 1990s
to around 80% at present “can’t go on forever,” he cautioned. “That’s
not to say it’s a huge problem today, but it could become a problem in
the future.”

Ingves had no comment on the bank’s key interest rate, the FT
wrote, which currently sits at 0.25%. The bank has said that it will
begin to raise rates starting this summer or early autumn.

According to information from the bank’s last meeting on April 19,
three of the Riksbank’s six board members were leaning towards hiking
the repo rate in July, while two others favored a later hike and one was
neutral.

–Frankfurt bureau; +49-69-720142; tbuell@marketnews.com

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