Swedish inflation expectations rise for all time horizons

Inflation expectations in Sweden rose for all time horizons, showed Prospera’s quarterly survey. Most significant is the uptick for the longer time horizon. Inflation expectations for the five-year horizon came in at 2.15 percent in September, as compared with June’s 2.06 percent. The September print is the highest since 2012.

The five-year expectations are usually believed to be most vital for the Riksbank. Inflation expectations for the one-year horizon and for the two-year horizon rose as well.  For all time horizons, expectations are at or above the 2 percent target. The rise in inflation expectations in the past year coincides with the uptick in headline inflation, noted Nordea Bank in a research report.

Meanwhile, wage expectations rose in the shorter term but stayed stable for the longer time horizons. Wage expectations are modest in a historical perspective. Higher inflation expectations are encouraging news for the Swedish central bank, Riksbank. The main question is if it would last.

“If inflation declines around the turn of the year as we and the Riksbank believe, then inflation expectations may fall too. This will keep the Riksbank dovish for a good while yet”, added Nordea Bank.

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