• Denmark’s 321% debt burden ‘no serious threat’

The coming year will be another one in which Sweden’s Riksbank — the world’s oldest central bank — must balance its concerns about high levels of household borrowing and low inflation, Wall Street Journal said in an article about 2014 outlooks.

A majority of the Riksbank’s six-member policy board spent almost all of 2013 emphasizing concerns about Sweden’s high ratio of household debt to disposable income –currently around 175%– when they set policy. The result was been a benchmark repo rate of 1%, well above the key European Central Bank and Bank of England rates, until December.

Governor Stefan Ingves has made clear that he remains worried about household debts, calling them an increasing risk to the economy.

He has suggested capping household indebtedness, not adjusting for assets. Last month, the central bank said that the country’s largest banks should continue to cut their structural liquidity risks and make sure they have enough capital to cope with future losses.

“The fact that household indebtedness is high and rising poses significant risks to the stability of the financial system and the real economy,” the bank said. “The size and concentration of the Swedish banking sector, as well as the banks’ extensive use of short-term market funding, create vulnerabilities that may have a negative impact on financial stability.”

However, Pier Carlo Padoan, chief economist at the Organization for Economic Cooperation and Development, has said that the Swedish Riksbank should stop worrying about the country’s record private debt load and could do more to support economic growth.

“We’re not tremendously concerned about household debt,” Padoan, who’s also deputy secretary-general of the Paris-based group comprising the world’s developed economies, told Bloomberg. “There’s not really a risk of a bubble. I don’t think that cutting rates by itself would send debt higher, would signal that there are easier monetary and financing conditions.”