Inflation Falls To Lowest Point Since 2021

Iceland’s inflation rate has declined to 5.1 percent, marking its lowest point since November 2021, when it stood at 4.8 percent, reports RÚV. This recent drop comes after a peak of 10.2 percent in February 2023 and arrives just ahead of the Central Bank’s next interest rate decision, set for November 20.

Statistics Iceland’s latest report indicates that while inflation has been decreasing steadily, the biggest contributors to last month’s increase came from food and airfare costs, which rose by one percent and nearly seven percent, respectively. Housing costs, which have traditionally pushed inflation higher, are now contributing less significantly to the overall rate. Without housing included, inflation remains steady at 2.8 percent annually.

Earlier this month, the Central Bank reduced interest rates by 0.25 percent, signalling the start of what Governor Ásgeir Jónsson described as a “cautious” rate-cutting phase. Jónsson emphasised the need to closely watch inflation trends before proceeding with further changes.

“Let’s put it this way: we’ve chosen to take very cautious steps, to move forward slowly with hope that this benefits us,” said Ásgeir at the beginning of October.