When we gradually raised the repo rate this year by a total of one and a quarter percentage points, it was because our inflation forecasts indicated that inflation would otherwise have been above the two per cent target at the end of the forecast period. This in turn was primarily due to economic activity developing strongly, both in Sweden and abroad. If the repo rate had not been raised to counteract this development, it would in the long term have affected capacity utilisation in the economy and pushed up inflation. Good productivity growth and low imported inflation have meant that inflationary pressures are lower than they usually are in corresponding cyclical phases, which has also enabled us to make the increases at a slow rate. I am therefore not particularly worried at present that the property market, either the commercial or the residential, will cause problems for financial stability. I can recommend to anyone interested in more in-depth information that they read the Riksbank’s Financial Stability Report, which will be published at the beginning of December. I am not particularly worried that house prices and household indebtedness have increased to such levels that a rebound would cause serious problems to the real economy and thereby affect the inflation-targeting policy. However, we are alert, as we do not wish this to happen. Thank you. BIS Review 105/2006  5  1.
Lars Nyberg: The Riksbank and the property market Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a lunch meeting, arranged by Connect Skåne, Kristianstad, 6 November 2006. *  *  *  To begin with, I should like to thank you for the invitation to come here to Kristianstad to speak about developments in the property market. This is a subject that certainly engages people, not merely us economists but also people who are not usually interested in economics or what the Riksbank does. The main interest is probably due to a house purchase being the largest individual investment most of us make in our lives. The Riksbank’s interest in the property market is based on the two tasks we have been set by the Riksdag (the Swedish parliament). One is to ensure that inflation remains at two per cent a year, with a tolerated deviation interval of plus/minus one percentage point. The other task is to "promote a safe and efficient payment system”, as it says in the text of the law. We wish to avoid the type of catastrophe Sweden experienced during the bank crisis at the beginning of the 1990s and we usually call this safeguarding financial stability. As I shall discuss a little later, developments in the property market can be significant for both these tasks and this is the reason for our interest.