The Central Bank’s quarterly monetary bulletin indicates that unemployment in Iceland will continue to rise, despite already having risen higher and faster than ever before. It is predicted that Iceland’s unemployment rate will peak at 11 % in 2010 before decreasing to 9.1 % the following year. Currently there is a 9.3 % unemployment rate in the country.
The CBI’s quarterly report further states that inflation will drop to 25 % this yeah, coming closer to the 2 percent target set by the Bank. Interest rates were lowered to 13 % yesterday, down 2.5 %.
Other predictions made by the CBI pertain to household saving and debt reduction, which they believe will be everybody’s key emphasis in the coming year. This prediction is supported by the fact that personal consumption decreased by 23.5 % this year and is expected to continue to decrease over the course of the coming year as well.
While personal consumption and interest rates are forecasted to be improving by 2011, this is not the case for Icelandic houses, with values expecting to have dropped by 46 % by that time. Currently homes are a quarter of the value they held in 2007.