Swedish inflation expectations remained largely unchanged in September and near the 2 percent inflation target. Wage expectations were stable at low levels, which might concern the Riksbank.
Prospera’s quarterly survey showed that inflation expectations were little changed, including money market players as well as labor market parties and purchase managers. Long term expectations (five years) for the CPI as well as CPIF remained close to 2 percent.
One of few more marked changes were money market players’ long term expectations for CPIF that dropped down to the lowest level since the CPIF expectations were included in the survey in December 2017.
Wage expectations is possibly most significant in the survey. Labor market parties’ expectations remained little changed for all time horizons. Fall in employee’s wage expectations was one exception for the five year horizon. Therefore, the trend with higher pay rises seen in other nations is not feeding through to wage expectations, at least so far, noted Nordea Bank in a research report.
Overall, Riksbank might possibly read today’s survey as inflation expectations being anchored at the target. The stable and low wage expectations should be of worry for the bank as it indicates towards to downside risks to the central bank’s forecast for wages as well as for inflation.