The Prospera’s quarterly survey, which includes money market player, labor market organizations and purchase managers, showed that inflation expectations increased further in June. The Riksbank is expected to welcome this, said Nordea Bank in a research report.
For the five-year horizon, inflation expectations came in at 1.86 percent in June for all respondents, as compared with March’s 1.8 percent. Usually, the five-year projections are said to be quite vital for the Swedish central bank. On the one year horizon, inflation expectations were up 0.1 percentage points to 1.1 percent; however, they continued to be the same on the two year horizon at 1.4 percent.
Expectations for wage on a five year horizon remained at 2.5 percent. Wage expectations for employers’ and employees’ organizations were up to 2.4 percent on a two-year horizon from 2.3 percent in March. On one year horizon, wage expectations came in at 2.3 percent as compared with 2.2 percent in March. However, longer term expectations continued to decline, reaching record low levels seen in mid-2015.
Overall, this is mostly encouraging news for the central bank. The Riksbank might consider this as signal that the monetary policy work and the credibility for the inflation target has firmed, according to Nordea Bank. This underpins the view that the central bank is done with easing policy. But, inflation expectations continue to be lower than the target rate.
