Swedish 5-year inflation expectations rise above 2 pct in January

The upward trend in Sweden’s inflation expectations from 2015 and 2016 was extended in January, according to the Prospera’s monthly survey. Inflation expectations, on all horizons, rose slightly. Furthermore, the five year inflation expectations rose above 2 percent for the first time since November 2013. It came in at 2.01 percent, a rise from the prior month’s 1.93 percent.

Inflation expectations of Sweden are to a greater degree adaptive to actual inflation developments, said Nordea Bank in a research report. The gradually higher inflation seen since the start of 2015, mainly because of increased energy prices, has thus added to raising expectations. Even if increasing energy prices are the main explanation, it cannot be ruled out that the easy policy from the central bank has contributed as well, noted Nordea Bank.

Sweden’s inflation is unlikely to accelerate much more in the future as the boost from energy prices will wane. With greatly unchanged headline inflation in the future, inflation expectations might also stabilize at current levels. In all, the accelerating inflation expectations give some comfort to the Riksbank, added Nordea Bank.