16 November 2022

Survey of market expectations

The Central Bank of Iceland conducted a survey of market agents’ expectations over the period from 7-9 November 2022. A total of 36 agents in the bond market, including banks, pension funds, mutual and investment funds, securities brokers, licensed asset management firms, and insurance firms were invited to participate. Responses were received from 33 market participants, giving a response ratio of 92%.


The survey findings indicate that market agents expect inflation to average 9.2% in Q4/2022. They expect inflation to continue falling, to 5.1% in one year and 4% in two years. This is lower than respondents indicated in the August survey, when one-year inflation expectations measured 5.8%. Five-year inflation expectations fell marginally between surveys, to 3.6%, while ten-year expectations were unchanged at 3.5%. The survey indicates that respondents expect the króna to appreciate marginally in the coming term, with the EURISK exchange rate measuring 145 in one year’s time.

Based on the median response in the survey, market agents project that the Central Bank’s key interest rate has peaked at 5.75% and will remain unchanged until Q3/2023, whereupon it will start to fall, to 5.25% a year from now and 4.5% in two years’ time. This is a lower interest rate than market agents expected at the time of the August survey.

Participants’ responses on the monetary stance have changed markedly: 18% now consider the current stance too loose, down from 67% in August. The share who consider the monetary stance appropriate has risen, from 29% in August to 67%. About 15% of respondents consider the monetary stance too tight, up from 4% in August.

The range of responses on inflation was narrower than in the previous survey as regards the next few quarters, while it was slightly wider for expectations two and five years ahead. The range of responses on interest rates was broadly unchanged between surveys.

Survey participants were also asked how they expected the real estate market to develop in the next twelve months. One-fourth of respondents said they expect real prices to fall in the next twelve months, and about a third expect nominal prices to fall. Some 60% of participants expect housing market turnover to decline over the coming year.

See here data on market expectations:

Survey of market expectations - November 2022

A special site for information on surveys of market expectations