BRUSSELS (MNI) – Inflation targeting is the best way to conduct
monetary policy, even taking into account the financial crisis, Riksbank
Governor Stefan Ingves said Monday in the text of a speech published on
the Swedish bank’s website.
His speech, to the Swedish Economics Association in Stockholm,
didn’t contain any monetary policy signals but said the Riksbank was
monitoring the situation in debt-ridden Greece closely.
The speech focused on the best ways to control asset price booms.
In the wake of the financial crisis, policymakers have been considering
ways to stem booming asset prices before they become a problem for the
economy.
House prices in Sweden are on the rise, partly because of the lower
interest rates used by the Riksbank to stimulate the Swedish economy
during the financial crisis, and some market participants fear a boom is
in the offing.
Ingves said a combination of higher rates and better regulation is
the best way to combat rising asset prices.
“I still believe that the best model is an inflation-targeting
policy conducted in an open and clear manner, and in which the work of
clarification and development continue apace,” he said.
“However, it is obvious that we need to learn more about how
financial imbalances should be handled, and that the crisis will have
consequences for central banks’ methods of working,” Ingves said.
One step in the direction of controlling property booms is a
ceiling for the loan-to-value ratio of new mortgages,” Ingves said.
He said crises can never be totally avoided, but “I do believe that
now, when our awareness of the problems is unusually great, we have the
chance to design regulations and frameworks that will at least make
these crises a little rarer and a little less dramatic.”
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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