The Central Bank of Iceland published results from its 11-13 August 2025 survey of market agents’ expectations, indicating slightly higher inflation expectations for the coming quarters than in the May survey and a shift towards expecting the policy rate to remain unchanged for the rest of 2025. The survey drew 28 responses from 37 invited bond market participants (76% response rate). Median expectations put inflation at 3.4% in one year, 3.0% in two years, and 3.0% on average over the next five and ten years, broadly unchanged at longer horizons versus May. Respondents also expected the króna to depreciate, with the EURISK exchange rate projected at 145.5 in one year. For monetary policy, the median view was for the key interest rate to stay at 7.5% for the remainder of the year (compared with May expectations of cuts to 7.25% in Q3 and 6.75% in Q4), before falling again in early 2026 to 6.75% in one year and 5.75% in two years. Views on the stance shifted as well: 43% judged policy too tight (down from 64%), 43% appropriate (up from 36%), and 14% too loose (up from 0%).
Central Bank of Iceland 2025-08-15
Central Bank of Iceland survey shows markets expect slightly higher near-term inflation and a 7.5% key rate through 2025
The Central Bank of Iceland's August 2025 survey of market agents revealed slightly higher inflation expectations and a consensus that the policy rate will remain at 7.5% for the rest of the year, contrasting with May's anticipated rate cuts. The survey also indicated expectations for the króna to depreciate and a shift in views on monetary policy stance, with fewer respondents considering it too tight.