Swedish FSA says economic policy needs to gradually return to normal

STOCKHOLM, June 1 (Reuters) - The highly expansionary monetary policy launched to fight the effect of the pandemic needs to be gradually withdrawn to keep a lid on house prices and risk taking in financial markets, the Financial Supervisory Authority (FSA) said in a report on Tuesday.

“For the FSA’s part, that means gradually rebuilding the resistance of the financial system,” it said in its regular Stability Report.

“In the short term, that means that the pause in the mortgage repayment rules will end as planned and that the counter-cyclical buffer level will be raised step-by-step.”

However, the FSA said it would leave its counter-cyclical buffer - capital banks need to set aside in good times against future losses - at 0% for the time being. (Reporting by Simon Johnson, editing by Helena Soderpalm)