Swedish inflation expectations continue to rise

Sweden’s long-term inflation expectations continue to be anchored at the 2 percent-target, showed Prospera’s quarterly survey. This is a short-term relief for the Sweden’s central bank while challenges remain in the longer term, noted Nordea Bank in a research report.

Inflation expectations for the five-year horizon was at 2.6 percent in June slightly higher than in March. The five-year expectations are usually believed to be most vital for the Riksbank. Inflation expectations on the one-year horizon and for two-year horizon was up too.

The rise in inflation expectations in the past year coincides with the uptick seen in consumer price inflation, stated Nordea Bank. Meanwhile, wage expectations continued to be stable for the shorter term; however, it rose on the five-year horizon to 2.5 percent. Wage expectations continue to be modest in a historical perspective, supporting the long term challenge for the Riksbank to keep up inflation, said Nordea Bank.

Given that the May inflation came in higher than expected and the Prospera survey showed a rise in inflation expectations makes additional stimuli measures unlikely, added Nordea Bank.