13 February 2013

Market expectations

During the period from 29 January through 1 February, the Central Bank of Iceland carried out a survey of market participants’ expectations concerning a variety of economic variables, including inflation and interest rates. A total of 36 agents in the bond market, including banks, pension funds, mutual and investment funds, securities brokers, and licensed asset management firms were invited to participate. Responses were received from 24 market participants, giving a response ratio of 67%.

According to the median response, market participants expect annual inflation to be 4% in Q1 and Q2/2013 and to measure 4.5% one and two years ahead. This is 0.2-0.3 percentage points less than in the last Central Bank survey, carried out in November 2012. Furthermore, the survey findings show that market participants expect annual inflation to measure about 4.5% five and 10 years ahead, which is broadly in line with the last survey. They expect the EURISK exchange rate to be 175 krónur per euro in one year’s time, which is 8 krónur higher than in the last survey.

The survey also shows that market agents expect the Central Bank’s collateralised lending rate to remain unchanged at 6% in the first half of 2013, which is 0.25 percentage points less than in the last survey. In addition, they expect the collateralised lending rate to be 6.25% in one year’s time, which is also 0.25 percentage points less than in the last survey. The majority of market participants considered the monetary stance appropriate at the time the survey was carried out.

For detailed results, see: Survey of market expectations (xlsx)

See also: Market expectations survey

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