20 August 2015
Market expectations surveyThe Bank’s market expectations survey was carried out on 10-13 August. A total of 30 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 18 market participants, giving a response ratio of 60%.
The results of the August survey indicate that market agents’ inflation expectations have risen since the May survey. According to the median response, survey participants expect annual inflation to average 2.1% in Q3/2015, 2.9% in Q4/2015, and 3.7% in Q1/2016. This is 0.1-0.7 percentage points higher than they expected in May. The survey also suggests that respondents expect inflation to measure 3.9% in one year and 3.5% in two years, which is 0.4-0.5 percentage points more than in May. Expectations concerning average inflation over the next five and ten years rose by 0.2-0.4 percentage points between surveys, to 3.5% and 3.4%, respectively. Moreover, the survey indicates that respondents expect the EURISK exchange rate to be 145 in one year’s time, which is about 3.3% lower than in the last survey.
According to the median response, market participants expect the Central Bank’s collateralised lending rate to be raised by 0.75 percentage points by the end of 2015 and then raised by another 0.5 percentage points in H1/2016, to 7%. This is up to 1 percentage point higher than according to the May survey. At the time the survey was conducted, about 67% of respondents considered the monetary stance appropriate, about the same as in the last survey. The percentage who considered the monetary stance too loose or far too loose rose from 11% to 28%, and the percentage who considered it too tight or far too tight declined from 28% to 6%.
In the August survey, market agents were asked to estimate the probability that inflation would measure 2-3% in twelve and twenty-four months’ time, respectively. About 78% of respondents considered it 0-40% likely that inflation would measure 2-3% in twelve months’ time, and about 60% considered it 0-40% likely in twenty-four months’ time.
See the market expectations survey here: Market expectations survey Q3/2015 (Excel document)
Further information on the market expectations survey can be found here: Market expectations survey