Tightening cycles have further to run

Prospects for economic activity have deteriorated further in recent months as headwinds to growth have become stronger. Inflation looks set to remain high for longer, eroding households’ real incomes; monetary policy is being tightened further and faster than anticipated; and the global economy now seems to be falling into a recession which will weigh heavily on export earnings. A combination of higher interest rates and falling household incomes is causing a downturn in residential property markets, particularly in Norway and Sweden.