Interest rate adjustments have the fastest effect on consumption of durable goods
News, Economic Commentaries Changes in interest rates have broad effects on consumption, but affect different groups of goods differently. An Economic Commentary published by the Riksbank examines the sensitivity of different components of consumption to interest rates. The analysis shows that the consumption of durable goods, such as cars, is particularly sensitive.
The Riksbank's previous analyses have shown that the increased indebtedness among households has meant that the impact of monetary policy on private consumption and demand in the economy has increased over time. In this Economic Commentary, authors Erik Berggren and Ingvar Strid examine the interest-rate sensitivity of different components of consumption, and relate their estimates to how consumption has evolved over the 2022-2024 interest rate hike period.
The largest effects of interest rates on consumption come with a time lag, but the fastest effects are on durable goods. Indicators of how consumption of such goods is developing, such as households' planned purchases of capital goods or new car registrations, could therefore provide an early outlook on how the Riksbank's interest rate cuts will affect consumption in the future.
Authors: Erik Berggren and Ingvar Strid, who work at the Monetary Policy Department.
Economic Commentaries
Economic Commentaries are brief analyses of issues with relevance for the Riksbank. They may be written by individual members of the Executive Board or by Riksbank staff. Staff commentaries are approved by the relevant head of department, while Executive Board members are themselves responsible for the content of the commentaries they write.