A TNS/Prospera survey published on Wednesday showed that inflation expectations five years ahead have risen from 1.8 to 1.9%, the highest level since the third quarter of 2013. Employer expectations rose from 1.9 to 2.0% while money market expectations remained unchanged at 2.0%.
Salary increase expectations rose 0.1 points to 2.3% over one year, to 2.4% over two years and 2.3% over 5 years. Nordea has commented that this is good news for the Riksbank.
According to the Riksbank’s own survey, firms are experiencing continued low price pressure and are finding it hard to raise prices despite relatively healthy demand.
Sweden’s economy grew twice as fast in the third quarter as economists had forecast, fuelled by rising consumption and investment. Exports also contributed to the growth, even if imports increased at a similar rate.
The economy expanded 0.8% in the quarter, said Statistics Sweden. At an annual rate, the economy grew by 3.9%. The Swedish krona strengthened by 5 öre against both the dollar and the euro on the news.
With the ECB expected to deliver more stimulus on Thursday, the pressure is on the Riksbank to cut the repo rate again in December. “However, the figures speak against any action by the Riksbank,” said Annika Winsth, Nordea’s chief economist.
The rapid rise in household debt is worrying the heads of the Riksbank, the Financial Supervisory Authority, and the National Debt Office (Riksgälden). The three write in Dagens Nyheter (DN) that low housing construction, falling interest rates, and scrapped taxes have driven up home prices and spurred borrowing, and warn that this trend could forebode the coming of a financial crisis. Amortisation requirements should be implemented as soon as possible, conclude the three.
The National Audit Office has started a preliminary study into the Riksbank and monetary policy, with the aim of launching an inquiry, which will be concluded by the end of the year.
“We want to examine how the Riksbank has fulfilled its price stability target, and whether the target is compatible with today’s situation. We also want to see whether the Riksbank has the right tools,” says Claes Norgren, who was deputy governor of the Riksbank in the early 1990s.
It is the first time the Audit Office has wanted to examine Sweden’s monetary policy, and means more pressure on the Riksbank.