Swedish inflation expectations dropped in October. There is an imminent risk that the downward trend might continue, noted Nordea Bank in a research report.
According to Prospera’s monthly survey, inflation expectations fell throughout the board in October, including only money market players. Most significant is that the longer-term inflation expectations fell. The fall in October signifies that inflation expectations are back at the lows seen in July, and roughly at the same level as in early 2015 when the Riksbank cut rates below zero and began the QE programmes. Inflation expectations are on a downward trend.
“As we see inflation below the 2% target, inflation expectations will probably decline further going forward. Price expectations are a key for the Riksbank. The bank can ignore temporary swings in inflation as long as expectations are anchored at the target, and the downward trend is thus a concern for the Riksbank, supporting our view of a rate cut around the turn of the year”, added Nordea Bank.
