Statistics Iceland released a new report that shows a 3.3% rate of inflation over the last twelve months, RÚV reports. This is twice as much as last year and the highest rate since 2013.
The press release stated that there was a 13.2% decrease in international airfare, which reduced the inflation rate by 0.16%. Skyrocketing housing prices have the been the main force behind inflation for years. If housing costs are removed from the factoring, there would have actually been deflation from July 2016 to April of this year. There has been a significant change in the trend, however, with October seeing inflation increase to 2.4%.
The Central Bank recently raised the interest rate to counteract inflation. In a rare moment of agreement, trade unions and business associations alike criticised the move as damaging to purchasing power.
Iceland is the smallest economy to have its own floating currency, which makes its value volatile. The ISK has been falling for months, which makes imports more expensive. Importers in turn promptly pass the cost onto customers, which leads to inflation. Apart from airline tickets, the opposite is rarely true in Iceland.