Inflation expectations have fallen to the Riksbank's target, shows a report from Kantar Prospera. This bodes well for all financially strained households and companies hoping for lower interest rates.
Over a one-year horizon, a so-called KPIF inflation of 2.0 per cent is expected, according to the latest measurement. In March, expectations in the corresponding report stood at 2.4 per cent.
Over a two-year horizon, a KPIF inflation of 2.0 per cent is expected, down from 2.1 per cent previously.
This can be compared to the Riksbank's inflation target, which stands at 2.0 per cent.
Over a five-year horizon, inflation expectations also stand at 2.0 per cent, down from 2.1 per cent.
Important factor
The measurements by Kantar Prospera are made on behalf of the Riksbank. The quarterly measurement presented now includes market players as well as labour market parties.
What the market and parties expect in terms of future inflation – alongside the actual inflation outcomes reported by Statistics Sweden (SCB) – is an important factor for the Riksbank's interest rate decisions.
The next inflation report, where May's inflation will be reported by SCB, is due out on Friday.
The next interest rate decision – following the first rate cut in eight years at the beginning of May – is due on 27 June. The Riksbank has flagged that there may be two more rate cuts of 0.25 percentage points each this year, but not until the second half of the year.
Interest rate expected to be cut
The average forecast for the interest rate among the survey participants stands at 3.6 per cent over a three-month horizon, 2.8 per cent over a one-year horizon, and 2.4 per cent over a two-year horizon. It is then expected to remain at that level over a five-year horizon as well.
Compared to the corresponding measurement in March, this represents a slightly faster downward trajectory for the interest rate.
The KPIF inflation shows the ordinary KPI inflation, but adjusted for the effects of mortgage rates, and is the measure used by the Riksbank in formulating its inflation target.
