At first, the poem seems to describe an odd, slightly unpleasant neighbour: someone who stays inside, hates noise, and has greasy hair and an unsettling smile. Then the third stanza turns things around. Her hugs don't hurt, because her arms pass straight through the speaker's shirt. That detail makes the speaker suspect she is a ghost.
What stands out is how gently the speaker reacts. There is no screaming or running away. Instead, the speaker decides that telling her the truth would be cruel, and chooses to stay quiet and keep hugging her "soul." The speaker's tone is quietly kind, even tender, and a little sad.
The mood mixes eerie and warm. The short, plain lines make the strange situation feel ordinary, almost casual. Judging by the poem's details, her dislike of loud noise and her rare appearances might hint at loneliness, and the speaker's silence is a way of giving her comfort without breaking the illusion.