Aino Bunge: Lower interest rates provide relief but do not solve structural challenges in the housing market
“There is more confidence that we have left the period of high inflation behind us. Outcomes and indicators also implies that inflation will remain in line with the target. For this reason we have been able to cut the policy rate gradually but at a rapid pace over the past six months, and we see further cuts ahead." These comments were made by Deputy Governor Aino Bunge, speaking about the economic situation today at Public Housing Sweden.
Date: 17/10/2024 09:15
Speaker: Deputy Governor Aino Bunge
Place: Clarion Hotel Arlanda, Stockholm
Aino Bunge, deputy governor.
“Low and stable inflation and lower interest costs are clearly improving households’ finances and making it easier for companies to invest. This will contribute to an economic recovery. It is important in itself that economic activity strengthens, but it is also a necessary condition for inflation to stabilise close to the target,” said Ms Bunge.
The interest rate-sensitive parts of the Swedish economy, such as household consumption and housing investment, were strongly affected by the interest rate increases. Now that interest rates are falling, it provides a relief.
"But monetary policy is not a housing policy. The interest rate does not address the structural challenges in the housing market. Here, politics has a larger toolbox and can influence taxes and regulations, thus contributing to increased mobility and housing construction."
At the same time, Ms Bunge stressed that we face a major new challenge ahead.
"We are facing a demographic headwind. Slower population growth than we have seen in recent decades will require that actors in society adapt strategies and solutions - not only for a well-functioning housing market, but also for increased prosperity in Sweden."