Saturos sent me the following:
STOCKHOLM, Nov 5 (Reuters) – A majority of Swedish rate-setters now firmly believe that high household debt levels must be considered when setting policy, a central bank source said, a shift that could cap rate cuts if debt starts growing.
Sweden’s economy is slowing as the turmoil in the neighbouring euro zone hits the exports of its leading firms, prompting markets to bet that the Riksbank will soon loosen monetary policy to underpin growth.
However, Swedes have among the highest borrowing levels in Europe and though worries of a housing bubble have subsided and borrowing growth rates have fallen, credit expansion is still strong. This seems to have put some policymakers off cutting rates.
The four most hawkish members of the six member executive board now think it is time to remove doubts that high levels of consumer debt and debt sustainability are factors in setting interest rates.
“It is only now that the majority (of the board) is clear that it puts an explicit emphasis on indebtedness and that it affects the assessment of the balance of inflation and resource utilization,” the source told Reuters.
The move, which has been brewing for some time, comes after criticism of board members for being unclear about whether they have other targets than the official one of an inflation goal of 2 percent over a 2-year horizon.
The source noted a hardening in the stance on household debt had been seen in late October in Central Bank Governor Stefan Ingves’ newspaper opinion piece, which surprised markets as it came just a week before a rate-setting meeting that had been seen as being in the balance.
The source also mentioned a speech by Deputy Governor Per Jansson, where he said household debt had to be taken into account, even if it was difficult exactly to quantify the impact of monetary policy measures on such borrowings.
. . .
In the last few years, the question about whether household lending should be taken into account when setting rates has been hotly debated within the board.
The more hawkish majority – currently Ingves, Jansson as well as Barbro Wickman-Parak and Kerstin af Jochnick – has referred to household debt occasionally as a reason to keep rates higher.
The most dovish member of the board, Deputy Governor Lars Svensson, has argued the repo rate is the wrong tool if debt is to be kept down.
So I get it. Only wimps favor straying from a rigid inflation target to save jobs. But the central bank has a duty of overrule the regulatory policies toward debt formation of popularly elected center-right governments, when they don’t happen to like them. Even when it means ignoring their inflation target. Why am I not surprised?
PS. I will attempt to be first to call the election tonight. I’ll probably fail, but if I can find a network with a non-idiot like Stu Rothenberg, I’ll let you know as soon as the numbers make it clear who will win. Of course by then Intrade will likely know–but it can be hard to access on election night.