Market expectations survey
At 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. During the week of 5-9 November, the Bank conducted the survey for the fourth time. 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 23 market participants, giving a response ratio of 64%.
Based on the median response, market agents expect inflation to measure 4.5% in Q4/2012 and 4.2% in Q1/2013, which is lower than in the last survey by 0.3 and 0.7 percentage points, respectively. Furthermore, the survey findings show that market participants expect annual inflation to measure 4.8% both one and two years ahead and to average 4.5% over the next five years. These results are broadly in line with the last survey. Market agents expect the EURISK exchange rate to be 167 krónur per euro in one year’s time, which is 12 krónur higher than in the last survey but broadly in line with the findings from the surveys carried out in February and May of this year.
According to the median response, market agents expect the Central Bank’s seven-day collateralised lending rate to be 6.0% at the end of 2012. This is unchanged from the last survey. In addition, they expect the collateralised lending rate to be 6.5% in one year’s time, which is 0.25 percentage points higher than in the Bank’s last survey. According to the 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 Q/4 2012 (xlsx)
Further information on the objectives and execution of the market expectations survey can be found here: Informational Reports 1.1