European Central Bank (ECB) Executive Board member Isabel Schnabel said on Tuesday that “Central banks need to pay more attention to house prices, both in terms of price stability and in terms of financial stability.” reports Reuters.
She explained that the ECB believes that euro area house prices “are currently overvalued against key indicators, making them vulnerable to future price adjustments”.
She also stated that the bank is considering adding the owners’ housing costs to the Harmonized Index of Consumer Prices, informing the bank’s future position on monetary policy.
“Monetary policy cannot turn a blind eye to such developments in an institutional environment in which macroprudential policies are generally the first line of defense, but are not yet fully effective,” Schnabel said.
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As for inflation, Schnabel reiterated that The ECB “will not react hastily” to rising inflation. She warned that “prematurely raising interest rates in response to a temporary jump in inflation would do the most harm to low-income households” and would put employment opportunities at risk.
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However, she noted that “There remains considerable uncertainty as to how resilient some of the current price pressures will be.”
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