We project that the consumer price index (CPI) will rise by 0.2% month-on-month in April, and that twelve-month inflation will measure 4.0%, down from 4.3% in March. It appears that inflation has peaked for the present and will taper off relatively quickly over the course of this year, falling below the Central Bank’s (CBI) 2.5% target at the beginning of 2022. Statistics Iceland (SI) is scheduled to publish the April CPI on 29 April.
Housing and food push upwards
The housing component is the main driver of the April rise in the CPI. The market is quite lively at present. Imputed rent is based on two main factors – house prices and the impact of mortgage interest expense – which are engaged in a tug-of-war at the moment. Our measurements suggest that the housing component will rise by 0.35% (0.11% CPI effect) in April. Within that component, the most pronounced change is in imputed rent, which is set to rise by 0.5% (0.08% CPI effect), owing to a 0.8% rise in house prices and an offsetting 0.3% decline in interest rates.