Policymakers at the Riksbank and Norges Bank face a tricky balancing act. The latest housing indicators from Sweden and Norway have been very weak, implying that prices will fall. But October’s consumer price inflation data from Norway were stronger than expected, and we expect data released next week to show a further acceleration in inflation in Sweden. On balance, the signs of weakness in both countries’ housing markets pose downside risks to our forecasts that their central banks will wait until 2024 to start cutting interest rates.
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