Middle-class anger against “too low” interest rate cuts

Published 20 August 2024 at 16.09

Economics. The Riksbank has decided to lower the key interest rate by 25 basis points to 3.5 percent – ​​a measure that is met with disappointment and criticism from several economists. The reduction is considered too low for the middle class house price party to start again in earnest.

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Among the critics is Elinor Odeberg, chief economist at the S-related the think tank Arena Idé, which believes that the reduction is insufficient in relation to the households' current financial situation.

She would have preferred a more aggressive strategy with at least a double reduction and believes that the cautious tactic will negatively affect consumption and housing costs.

– It affects household consumption and not least housing costs, which is what weighs on people now. It will likely mean that more mortgage borrowers choose variable interest rates, even though Thedéen himself has encouraged fixed loans for greater predictability. But now people are likely to choose flexible because they expect the interest rate to be lowered in the future, says Elinor Odeberg to Aftonbladet.

Elinor Odeberg herself lives in an apartment on Södermalm in Stockholm, which is valued at just over 8.7 million kroner.

Fredrik Kopsch, chief economist at the liberal think tank Timbro, shares Odeberg's criticism and warns that the slow rate of reduction could worsen the situation for both mortgage borrowers and companies. He particularly highlights that the economic consequences can hit “people on the outside”, such as those born abroad with low education, which can lead to increased unemployment and social problems such as segregation and crime.