17 August 2022

Survey of market expectations

The Central Bank of Iceland conducted a survey of market agents’ expectations over the period from 8-10 August 2022. A total of 31 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 24 market participants, giving a response ratio of 77%.


The survey findings indicate that market agents expect inflation to peak in Q3/2022 at an average of 10%. They also expect inflation to begin subsiding thereafter, to 5.8% in one year and 4% in two years. This is higher than respondents indicated in the April survey, when one-year inflation expectations measured 5%. Long-term inflation expectations have also risen since the last survey. Respondents now expect inflation to average 3.8% over the next five years and 3.5% over the next ten. The survey indicates that respondents expect the króna to appreciate marginally in the coming term, with the EURISK exchange rate measuring 138 in one year’s time.

According to the median response in this survey, market agents expect the Central Bank’s key rate to rise to 5.5% in Q3/2022 and then rise to 6% by Q1/2023. Then they expect it to have declined to 5.5% one year from now and to 4.5% by the end of two years. This is a higher interest rate than market agents expected at the time of the April survey.

Participants’ responses on the monetary stance have changed somewhat: 67% now consider the current stance too loose, down from 79% in April. On the other hand, the share who consider it appropriate rose to 29%, from 17% in the last survey. Just over 4% of respondents in this survey – the same as in the April survey – consider the monetary stance too tight.

The range of responses on inflation was wider by all measures than in the last survey, particularly as regards the next few quarters. However, the range of responses on interest rates was somewhat narrower than in the last survey.

See here data on market expectations:

Survey of market expectations - August 2022.

A special site for information on surveys of market expectations.