Inflation Lowest in Three Years

Published September 29, 2010

Iceland’s current rate of inflation is lower than it has been in about three years, according to Statistics Iceland.
Inflation has actually dropped in the past month alone, from 4.5% to 3.7%. This went against all expectations that there would be a 1.5% increases in prices across the board. In fact, prices on average remained steady.
Auðbjörg Ólafsdóttir, a specialist at Landsbanki, told RÚV that a strengthening kronur can account for the drop in inflation, with the costs of goods decreasing slightly in most categories. However, the prices of clothing and shoes actually went up in the past month, due to summer’s end sales closing up. That said, the strengthening crown counterbalanced those price increases, and so prices on average remained stable.
Auðbjörg also points out that a planned increase in rates for electricity and heating, as well as rising global prices for grains, will add pressure to the economy. On the other hand, inflation will continue to decrease because the months with the greatest inflation rates from last year are falling off the charts for the year’s average.
Despite this being the lowest rate of inflation that Iceland has seen since August 2007, the Confederation of Icelandic Labor Unions points out that there has still been little change in the price of imported food, despite the strengthening of the kronur.



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