Aino Bunge: Light at the end of the tunnel - time to start thinking about next time?

Speech by Ms Aino Bunge, Deputy Governor of the Sveriges Riksbank, at Fastighetsdagen Stockholm, Stockholm, 23 May 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for the invitation to come here!

The situation today is a little different than at the time of Fastighetsdagen Stockholm last year. At that time, inflation was just below 7 per cent measured by the Riksbank's target variable, the CPIF, and just over 8 per cent if one excludes the contribution from energy prices, which had begun to fall back. To curb the rise in inflation, the Riksbank and other central banks had raised their policy rates substantially and rapidly. It is not surprising that this has had an impact on the property and housing markets.

The interest rate increases have had a strong impact on businesses and households, and I realise that for many in this room, it has been an acid test. Overall, the Swedish economy and labour market have shown resilience, but we have seen a major impact on household consumption, a dramatic fall in construction investment, house prices have fallen and property companies have in many cases had to restructure their balance sheets. All these parts of the economy have in common that they are sensitive to interest rates. Today the situation is somewhat brighter in many respects. Inflation is much closer to the target, the economy has slowed down, but much less than most people predicted a year ago, and all analysts, including the Riksbank, are expecting lower policy rates going forward.

In my contribution at our last monetary policy meeting, when the policy rate was cut for the first time in eight years, I said that the prospects for inflation look brighter with regard to the Swedish economy, but that there are still risks abroad and linked to the weak Swedish krona.