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Prospera inflation expectations keep both 75bp and 100bp in play next week

  • Something for everyone in today's Prospera inflation expectations data which will keep the market on its toes looking for either a 75bp or 100bp hike at next Tuesday's Riksbank meeting. Non-money market players have increased their 2-year inflation expectations notably, but 5-year inflation expectations remain well anchored.
  • The most concerning part of the Prospera inflation expectations survey is the increase in 2-year inflation expectations among non-money market players. For all players, the mean of 2-year CPIF expectation has increased to 3.344% from 2.841% (a 0.503% increase) and the median has increased from 2.60% to 3.00%. Slightly smaller increases are seen in both the mean and median for headline CPI.
  • However, this is not reflected in money market players' expectations of inflation at the 2-year horizon - which has seen the median rise a little for both CPIF and CPI but the mean expectation for CPIF has actually fallen since June (and is consistent with August levels and well below the July expectation).
  • 5-year inflation expectations are remaining pretty well anchored throughout and not really a concern for the Riksbank at this stage.
  • With both 75bp and 100bp both plausible next week, there was little movement in EURSEK.

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