28 August 2012

Market expectations survey

In the beginning of 2012, the Central Bank of Iceland began conducting quarterly surveys of market agents’ expectations concerning a variety of economic variables such as inflation and interest rates. The Bank carried out its third such survey during the week of 13-17 August. A total of 35 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 25 market participants, and the response ratio was therefore 69%.The survey results show that the market expects inflation to measure 4.6% in Q3/2012, which is somewhat lower than in the last survey.

According to the median response, the results show that market participants expect annual inflation to measure 4.8% in one year and 4.5% in two years. These figures are almost a percentage point below the corresponding results of the last survey. Market agents expect the EURISK exchange rate to be 155 krónur per euro in one year’s time, which is 11 krónur lower than in the last survey.

The median response indicates that the market expects the Central Bank’s collateralised lending rate to be 5.8% at the end of September 2012, or 0.2 percentage points higher than in the last survey. In addition, they expect the collateralised lending rate to be 6.3% one year from now. This is unchanged from the previous survey findings.

According to the survey, most market participants considered the monetary stance appropriate at the time the survey was carried out.

See here:  Market expectations survey