Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble

Wage Growth vs. Housing Price Growth By Nick Kamran, an American living in Oslo, Letters from Norway:
Historically, central banks throughout Europe had one mandate: price stability. They did not worry about employment or economic growth, only currency integrity. Setting interest rates to contain inflation ensured that a Krone or a Euro would purchase tomorrow what it could today. Nevertheless, since the ebbing of the 2008 financial crisis, The ECB, of which Finland is a member, officially added full employment and economic growth to their mandate. The Norwegian, Swedish, and Danish Central Bank’s followed suit, stating that they would consider ‘other factors’ than inflation when basing an interest rate decision.
Hence, instead of remaining impartial – leaving it to lawmakers, markets, and the public to deal with the prevailing interest rate – the central banks became involved in policy making. Adding employment and economic growth to their mandate equates to the National Institute of Standards changing the definition of the meter to help an engineering firm, working on a major bridge project, meet budgetary and timeline constraints. In addition to creating a dilemma, the additional mandates made central banks appear politically biased.

This post was published at Wolf Street on Mar 4, 2017.