Inflation has declined and contributed to a fall in nominal interest rates. A more stable inflation environment also results in lower real interest rates when investors become more certain about returns. Furthermore, it would appear that high saving in some parts of the world is pushing down long-term interest rates. Saving is high both in oil-producing countries, China and other Asian countries. Long-term interest rates in Norway largely shadow external interest rates because like other countries Norway is keeping inflation in check. Norwegian households primarily finance house purchases by means of floating-rate loans. Long-term interest rates are still of considerable importance because they provide information about the future path of short-term interest rates that borrowers can expect over time. Unusually low short-term interest rates have probably also boosted the rate of increase in house prices in recent years, but this effect will be reversed when the interest rate is raised to a more normal level. Short-term interest rates have influenced the path for house prices over the past 15 years, but periods of low interest rates are followed by periods of higher interest rates. Norges Bank’s key policy rate is therefore of limited importance for house price inflation over a period of 15 to 20 years. The housing stock in Norway, which numbers a good 2.2 million dwellings, shows little change from one year to the next. As a result, higher demand for housing will primarily translate into higher prices in the short term.
14 [18]  weight to “green assets”34 or perhaps avoid “brown” assets? If climate change is seen as a threat to financial stability, it may seem unreasonable that central banks themselves should hold bonds, the market pricing of which does not take into account the climate-related risk that the company contributes to. An alternative to the purchase of green bonds could be to refrain from buying bonds from companies that create carbon emissions over a certain level. I do not have an answer to the question of what action the Riksbank will take in this issue if we are faced with a scenario where we need to decide whether to extend and broaden our bond purchases. My message today is that we are participating in the ongoing international work to analyse and draft recommendations on an appropriate way forward. These questions are extremely complex. They require analysis of legal frameworks, of how green and brown assets are defined, any potential side-effects, how effective the measures would be compared with other types of measures, and the effects of policy tightening, i.e. selling assets if the economic cycle turns.35  Central banks are taking the climate issue seriously The Riksbank constantly faces new challenges that affect price stability and financial stability. Climate adaptation is one of many changes currently affecting the Swedish and the global economy. Digitalisation, a greying population, trade conflicts and, most recently, the coronavirus are other important issues that also create new challenges for us and for other central banks.