So it is unsurprising that Statistics Iceland's standard of living study revealed that households with onerous housing costs have declined substantially in number. About 10% of homeowners and 14% of renters consider their housing costs burdensome. This shows that debt service has risen less than could be inferred from public discourse. Just over half of households who have taken loans in the past three years have seen their debt service rise by less than 30,000 kr. per month. After adjusting for wage growth, the ratio of debt service to disposable income is broadly unchanged. As of this past January, the share of households whose debt service exceeds 35% of disposable income had risen by only 2 percentage points, from 7% to 9%. The winds are now changing in the real estate market, and the Central Bank is determined to push real rates upwards, whether through policy rate hikes or by lowering inflation and inflation expectations. This is why, in its most recent statement, the Financial Stability Committee encouraged mortgage lenders to "work with borrowers, as they have in the past, to prevent financial distress insofar as is possible." I expect that we will be taken seriously and that the banks will be prepared to respond when fixedrate clauses expire this coming winter. On the other hand, there is no reason for taxpayers to subsidise borrowers' mortgage interest expense - not at this point in time, at least.
Large fluctuations of the exchange rate of the leu that are decoupled from domestic economic fundamentals, as well as from the monetary policy pursued by the National Bank of Romania  4. Major deviations from the administered price adjustment programme announced by the Government, in terms of both magnitude and proposed calendar  5. Divergence of the fiscal and income policies, in terms of implementation and outcomes, from the programmed coordinates  Case in point: monetary policy under a string of VAT changes  To give you a flavour of the environment the monetary policy has had to operate in lately, we had three VAT rate cuts from 2013 to 2016, after a hike in 2010, and another cut is scheduled for 2017. Currently, the annual inflation rate stands at –3.25 percent, the most negative value in the EU. Excluding the first-round effects of the VAT cuts in mid-2015 and early 2016, headline inflation would have hovered around +1 percent. Consequently, the negative inflation we are dealing with now is not at all a condition brought about by a persistent lack of demand, as economic activity, employment and wages are actually buoyant. This is just a transitory development, induced by the aforementioned indirect tax cuts. The textbook policy choice would be to accommodate the temporary deviation from the inflation target and focus on the VAT-adjusted inflation developments – especially since the latter paint a quite different picture.