The fact that the Swedish economy has been strong has also led to a resilient Swedish labour market, and the number of those employed has continued to increase somewhat during the year. However, the supply of labour has also increased, so that the fall in unemployment we have seen since the start of 2010 was interrupted at the end of 2011. Unemployment in Sweden is now just below 8 per cent per cent (see Figure 9). …but high household indebtedness constitutes a risk Another reason why the Swedish economy has coped so well is that we have not suffered a crash on the housing market or in other areas of the financial sector. Nevertheless, developments in Sweden have given cause for concern. Housing prices have risen significantly in Sweden over the last 15 years in both an international and historical perspective (see Figure 5). The same applies to household indebtedness (see Figure 6). It is not surprising that there is a link between these factors as a large proportion of the banks’ lending to households has been used to buy housing. I and several of my previous colleagues on the Executive Board warned about the risks associated with household indebtedness and housing prices in Sweden long before the financial crisis. One could say that the crisis has given these issues renewed and increased currency.
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.