But to restrain household indebtedness, we would actually need an “extra policy rate”, aimed at households and able to be set at a higher level than the usual policy rate. However, as the Riksbank can only steer the general level of interest rates and a part of the transmission is that households borrow more when interest rates are low, we now have to turn to other policy areas to manage household indebtedness. 5  For a more in-depth description of the development of housing prices in Sweden, see, for example, Financial Stability Report 2015:1, pp. 11–12. BIS central bankers’ speeches  5  ... but assumes measures will be taken on the housing market for success in the longer term One condition for our monetary policy trade-offs to be successful is for measures against indebtedness to be taken elsewhere. If this does not happen, we may encounter major problems later on, both for the economy in general and for monetary policy. Let us assume that no measures are taken. The housing rally could then potentially continue. In the worst case, international confidence in the Swedish housing market would start to collapse. As covered bonds are largely held by foreign investors, we would risk having these investors remove a large part of the banks’ funding, which could have effects not only on financial stability but also on inflation. In that case we could describe a very bad scenario: The banks would encounter funding problems, which in turn would lead to higher lending rates and lower demand.
On the fiscal front, cuts in wage and corporate income taxes differentiated across regions have been put in place last week to support the economy that is already growing at a moderate pace. 1  On March 15, 2009 Special Consumption Tax (SCT) rates were decreased on vehicles to %18 from %37, and on durable goods and other electrical household appliances to %0 from %6.7. These rates were increased on vehicles to %28, on durable goods to %2 and on other electrical household appliances to %6.7 on 16 June, 2009. By October 1, 2009, SCT rates were brought back to the levels before March 2009. Similarly, Value Added Tax (VAT) rates on furniture and IT products were slashed to %8 on March 30, 2009, before being raised back to the initial rate of %18 on October 1, 2009. BIS central bankers’ speeches  3  Dear Participants, So far I have touched on the impacts of movements in commodity prices on inflation and economic growth. Now I will talk about the impact of fluctuations in commodity prices on foreign trade balances. The dependency of the Turkish economy on energy imports makes the current accounts balance more sensitive to changes in commodity prices. Uncertainties regarding the global economy in recent years and the exceptionally loose monetary policies adopted by advanced economies, such as the United States, Japan and the Euro Area, foreshadow the high probability of continued excess volatility in commodity prices.