MNI BRIEF: Rate Rises Pose A Stability Risk: Riksbank Report

Higher interest rates could be a risk for the economy going forward, the Riksbank's latest Financial Stability Report states, coming just as the central bank embarks on a period of monetary policy tightening.

The report warns of the impact of higher interest rates on asset prices and economic agents, with financial stability risks rising. It noted that "Swedish household debt has continued to increase more rapidly than their disposable income," and that it was uncertain how consumers, having experienced a prolonged period of ultra-low interest rates, would respond to rising ones.

The report also warns that property companies, with high leverage, could see their profits eaten up by higher rates and if credit conditions tighten "the risk of large price falls on their properties increases." While financial stability risks in themselves should not influence monetary policy setting, a cycle of falling property prices and weaker consumption could act as a brake on tightening, the report adds.