Household Indebtedness, the Exchange Rate and Risks

9 Pages Posted: 28 Apr 2005

See all articles by Sushil Wadhwani

Sushil Wadhwani

Bank of England - Monetary Policy Committee

Abstract

In this speech, Sushil B Wadhwani argues that the current rate of growth in household debt is unsustainable, but the vulnerability of the economy to rising debt should not be exaggerated. Australia and New Zealand have experienced significant exchange rate depreciations at a time when household debt rose strongly. So far, the impact on consumer price inflation and interest rates in these economies has been modest. He also notes that holding interest rates higher than necessary to hit the inflation target might lead to an even higher exchange rate, which may increase future inflation volatility and weaken the corporate sector.

Suggested Citation

Wadhwani, Sushil, Household Indebtedness, the Exchange Rate and Risks. Bank of England Quarterly Bulletin, Summer 2002. Available at SSRN: https://ssrn.com/abstract=708301

Sushil Wadhwani (Contact Author)

Bank of England - Monetary Policy Committee ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom
+44 20 7601 3235 (Phone)

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