Inward migration flows are lower than in the period to summer 2008, but have not come to a complete halt. In 2009, the loss of confidence among banks also affected household mortgage financing. Banks no longer provided bridging loans. Housing turnover fell, but has now picked up again. House prices are rising after a sharp fall in the second half of 2008. Last autumn it was important to restart the housing market, which will also gradually provide the basis for a potential recovery in residential construction. However, the revival in house prices is not a positive development. The level of house prices in Norway is very high and the additional rise that has now occurred will only increase the potential fall. Developments in Norway, and to an even greater extent in other countries, show that economic policy instruments are not perfect. The interplay between credit and property prices in particular poses challenges. Interest rate setting influences this interplay only indirectly. The interest rate rises in good times when inflation is expected to increase and falls when growth and inflation moderate. The interest rate is an approximate instrument, which can be used to keep inflation in check over time and thereby stabilise output and employment. In a small, open economy such as Norway’s, the exchange rate is important for inflation and the level of activity. There is therefore little leeway for setting the interest rate specifically with a view to influencing property markets and credit growth.
Growth in public demand, stronger confidence in financial markets and low key rates are fuelling investment abroad. Even though the global economic situation now seems to have stabilised, there is still a risk of continued low growth for a fairly long period ahead. The severe downturn and fall in commodity prices has led to very low or negative consumer price inflation in many countries. Inflation is still moving down and is now negative in for instance the US, the euro area, Sweden, Japan and China. Core inflation is more stable, but has also shown a slight decline recently. The current low level of activity and high unemployment will also act as a brake on inflation in the period ahead. One characteristic of the crisis was the substantial increase in money market rates. Confidence between banks evaporated. Banks reacted by raising interest rates on loans to businesses and households. They started to turn off the lending tap. Measures implemented by central banks and governments have had a stabilising effect. The most important markets have also gradually become less disorderly, with less distrust among participants. The risk that issuers of credit will go bankrupt has diminished. Activity in money and bond markets has picked up and fluctuations are less pronounced. The situation in the interbank market has improved. The spread between money market rates and expected key rates, which is an indicator of risk premiums in the money market, has decreased. Money market premiums in Norway have also fallen. Equity markets have risen since early 2009.