Alternative scenario : Higher interest rates are slowing inflation and economic growth in Finland

Abstract

The ECB has substantially tightened monetary policy in the euro area during the past two years, following the exceptional surge in inflation. The tightened monetary policy is being transmitted to the economy through many different channels, including rises in lending rates. Higher interest rates are dampening economic growth and slowing down inflation. In Finland, variable rate mortgages are common, which to some extent is amplifying the impacts of monetary policy on economic growth and inflation. However, another key factor regarding the strength of the impacts is the amount of financial margin households have that can be used as a buffer against the increase in loan servicing costs.