Statistics Iceland’s (SI) newly published consumer price index (CPI) data contained little that surprised us. Summer sales, an unusually small seasonal jump in airfares, and a slow rise in house prices were the main contributors to the decline in the CPI in July. Twelve-month house price inflation is at its weakest in eight years. The inflation outlook has generally improved, and inflation appears set to remain broadly steady at close to the current rate in coming months. We expect the Central Bank’s (CBI) inflation target to be within reach by the end of this year.
According to the figures from Statistics Iceland (SI), the consumer price index (CPI) fell 0.2% month-on-month in July, lowering twelve-month inflation to 3.1% from the June measurement of 3.3%. The CPI excluding housing fell by 0.4% during the month, and twelve-month inflation thus measured is now 2.8%. The July measurement is in line with our forecast. We had projected that the CPI would fall by 0.2% MoM, whereas forecasts from other banks’ analysts ranged from a 0.2% decline to a 0.1% increase. All major CPI components developed in line with our forecast, and there was little that took us by surprise.