Statistics Iceland’s (SI) newly published consumer price index (CPI) data contained little in the way of surprises. The main drivers of the rise in the CPI in May were petrol and food prices. The inflation rate is expected to hold relatively steady in coming months, and the inflation outlook has generally perked up with the approval of wage settlements in April. The contribution of house prices to inflation has tapered off steadily in the recent term. We expect the Central Bank’s (CBI) inflation target to be within reach by the end of this year.
According to SI’s figures, the CPI rose 0.2% month-on-month in May, raising headline inflation to 3.6%, from 3.3% in April. The CPI excluding housing also rose by 0.2% during the month, however, and twelve-month inflation thus measured was 3.1%. The May measurement was in line with published forecasts. We had projected a MoM rise of 0.2%, whereas the banks’ forecasts as a whole lay in the 0.1-0.2% range. All major CPI components developed in line with our forecast, and there was little that took us by surprise.