Housing bubbles make it tough for central bankers

Sweden and Norway likely to hold rates but outlook remains uncertain

Published Wed, Oct 23, 2013 · 10:00 PM
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[OSLO] Central bankers in Sweden and Norway are finding their efforts to steer inflation being disrupted by a persistent threat of housing bubbles.

While policy makers in both countries will keep interest rates unchanged today, according to economists surveyed by Bloomberg, distortions in the two nations' property markets are adding a layer of uncertainty to outlooks.

In Sweden, the largest Nordic economy, a brief lull in the housing market after a series of measures to curb demand has been replaced by accelerating prices. Apartment prices rose 14 per cent in the 12 months through August after more than doubling since 2000.

That's prompted Swedes to take on bigger mortgages to help finance their homes, driving debt relative to disposable incomes to a record high. Riksbank governor Stefan Ingves has repeatedly sounded the alarm and says the …

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