Highest inflation in a year
Inflation now measures 2.2% in Iceland, the highest level seen since August 2014. That notwithstanding, inflation is below the Central Bank’s (CBI) 2.5% inflation target, as it has been for the past 19 months straight. The outlook is for a steady increase over the next few months and an inflation rate well above the target by the year-end.
End-of-sale effects and groceries push the CPI upwards
Housing costs rise on the back of wage settlements
Travel component declines
Reduced near-term inflationary pressures
Near-term inflationary pressures could turn out weaker than we had assumed, owing to the drop in fuel and commodity prices over the past few weeks. In addition to the effect on fuel prices in the CPI, the steep decline in commodities could affect the price of items ranging from airfares to imported food. Imported deflation could therefore offset domestic cost price increases in coming months, particularly in view of the appreciation of the króna since mid-year.