Various measures of inflation expectations

People’s ideas about how the price of goods and services will move in the future have a strong impact on how inflation develops. This is because expectations about price movements affect, among other things, workers’ wage demands and firms’ decisions about the price they charge for their goods and services. As a result, the Central Bank closely monitors individuals’ and companies’ firms’ expectations concerning inflation. It is important that monetary policy be conducted so as to keep inflation expectations in line with the Bank’s inflation target – long-term expectations in particular – as this fosters economic stability. The most important measures of inflation expectations are the expectations of households, businesses, and market agents, as well as the breakeven inflation rate in the bond market.

The table and documents below show short- and medium-term inflation expectations according to these measures. Household and corporate expectations are determined through Gallup surveys carried out for the Central Bank on a quarterly basis.[1]  Since 2012, the Central Bank has carried out quarterly surveys in which market agents are asked about their expectations concerning key economic variables, including inflation. The breakeven inflation rate in the bond market is calculated from the spread between indexed and nominal bond interest rates. It should be borne in mind, however, that the breakeven rate also includes a risk premium that reflects bond liquidity and uncertainty about future interest rates and inflation, among other things

* Gallup's most recent corporate and household inflation expectations surveys were conducted in May and June 2025. The Central Bank's most recent market expectations survey was conducted in August 2025. Expectations are based on the median response. Households and businesses are not asked about ten-year inflation expectations. Households' and businesses' inflation expectations is scheduled for 17 September 2025. Market agents' inflation expectations will be published next 12 November 2025. The breakeven inflation rate is updated at the end of each quarter. The estimation of the breakeven inflation rate has been revised from Q2 2024 onwards (see Monetary Bulletin 2025/3 for further information).

Sources: Gallup, Central Bank of Iceland.