"Sweden Most At Risk Of Asset Bubble" Moody’s Warns, After Taking A Look At Swedish House Prices
By Tyler Durden
Last September, in the aftermath of Sweden going full NIRP, we warned that
Today, six months after our most recent observations on the state of the Swedish housing bubble, Moody’s chimes in and warns that as a result of NIRP, the country is most at risk of an “ultimately unsustainable asset bubble”:
… the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent — in the form of rapidly rising house prices and persistently strong growth in mortgage credit”, adds Ms Muehlbronner. In Moody’s view, these trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability as and when house prices reverse trends. In all three countries, households are highly leveraged, and while they also have high levels of financial assets, returns on these assets will be under increasing pressure if the negative interest and yield environment persists.
And adds:
Moody’s believes that the Riksbank will find it difficult to achieve its objective of significantly pushing up consumer price inflation in a deflationary global environment, while the sustained and strong growth in mortgage lending and house prices risks leading to an (ultimately unsustainable) asset bubble.
We expect this latest warning to be soundly ignored because after all, what else can the central banks do in this global coordinated effort to stimulate economies with ever more debt, which by definition can only work if rates are not only at zero, but increasingly more negative.
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Here is Moody’s with “Negative interest rates in Switzerland, Denmark, Sweden are having unintended consequences, with Sweden most at risk of asset bubble“
The central banks of Switzerland, Denmark and Sweden (all rated Aaa stable) have been among the first to push policy rates into negative territory. A year into this novel experience, Moody’s Investors Service concludes that, from among the three countries, Sweden is most at risk of an — ultimately unsustainable — asset bubble.
Moody’s report, entitled “Governments of Switzerland, Denmark & Sweden: Negative interest rates have unintended consequences, with Sweden most at risk of asset bubble,” is available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release. The rating agency’s report is an update to the markets and does not constitute a rating action.
The three countries’ central banks have lowered their key policy interest rates to the current -0.75% in Switzerland, -0.65% in Denmark and -0.5% in Sweden, albeit for different reasons. The Swiss and Danish central banks were aiming to reverse the intense appreciation pressure on their currencies as a result of the ECB’s introduction of its quantitative easing program. In Sweden, the central bank is focused on lifting persistently low inflation, in the context of the ongoing strong economic expansion.
“In Moody’s view, the Danish and Swiss central banks …read more
Source: "Sweden Most At Risk Of Asset Bubble" Moody’s Warns, After Taking A Look At Swedish House Prices
