However, we also need to take into account the risks associated with household indebtedness in our repo rate decisions. Our balancing act in October resulted in an unchanged repo rate, but a downward adjustment of the forecast for the repo rate (see Figure 18). Such a monetary policy means that we can, on the one hand, attain the inflation target and stabilise employment in the long term and, on the other hand, take the risks associated with financial imbalances into account. However, monetary policy alone cannot eliminate the risks associated with household indebtedness that I have discussed today. It is important to have a wide-ranging discussion among several authorities in Sweden on the need for additional measures. 6  BIS central bankers’ speeches  Figures Figure 1. Repo rate Per cent, daily data 5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  Source: The Riksbank  Figure 2. GDP growth in Sweden and the world Annual percentage change, calendar-adjusted data 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  Sweden The world  -6  -6 80  85  90  95  00  05  10  15  Note. The broken line and bars refer to the Riksbank’s forecast in MPR October 2012.
However, there is no natural limitation of the indebtedness of the private sector and this becomes a particularly important issue when the repo rate is low. This has led to major problems on two previous occasions. In the 1990s, there was an excessive expansion of credit and many loans were used to fund the purchase of commercial properties. More recently, we imported problems via the banks’ excessive lending in the Baltic countries. Today I am talking most about household indebtedness, but the issue is a general one. We need to focus more than previously on debts and the stock of debts in our analysis apparatus. More specifically-targeted tools are possibly more effective than the repo rate to deal with household indebtedness, for example amortisation requirements and higher risk weights for mortgages. Higher risk weights for mortgages mean that the banks must hold more capital for their mortgages. This is something that the Riksbank has pointed out earlier on a number of occasions and that we analyse in more detail in our latest Financial Stability Report. The issue has also been discussed by the council for cooperation on macroprudential policy set up jointly by Finansinspektionen and the Riksbank. Finansinspektionen recently proposed a floor of 15 per cent for risk weights for mortgages in Sweden. 4 However, of the conceivable concrete measures for preventing risks on the housing market in Sweden, the mortgage cap is practically the only one in place today.