Iceland’s rate of inflation increased 1.38 percent in June, meaning a rate of 12.2 percent inflation in the last 12 months (16.7 percent when housing costs are excluded).
This rate of inflation is higher than the banks predicted, with NBI (Landsbanki) predicting 1.2 percent and Islandsbanki just 0.9 percent.
Around 0.7 percent of the monthly increase comes from significant tax increases on alcohol, diesel, petrol and tobacco.
The price of petrol and diesel increased 7.8 percent month-on-month (a 0.36 percent effect on inflation), and alcohol and tobacco increased by 9.8 percent (a 0.32 percent effect of inflation). The cost of food and drink went up by 1.2 percent (0.17 percent effect).
The cost of owned private property decreased by 0.8 percent (-0.11 percent) – therein the effect of lower market value was -0.07 percent and the effect of lower interest on mortgages was -0.04 percent.
Islandsbanki predicted 0.9% and the actual value was 1.38%. That’s over 50% out when looking just one month ahead! Have the fishermen moved from trading currencies to predicting inflation?
@Jim,
It is a very complicated task to predict the inflation: it is not an easy thing! Predict 0,9 and actual value 1,38, is not a terrible thing!
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Petrol, summer and krona: higher inflation.
Policy rate should not be cut next month; if Krona does not drop in July (175-181 against Euro), better inflation -YoY- in July and, I expect better inflation numbers to continue, and policy rate could be cut at August-September!
Cut of policy rate now? NOTHING
better inflation numbers – this is really very important…indeed.
As medics joke:
Doctor asked a nurse “Was the client sweating before he died, sister?”
Nurse – “Yes, doc, a lot!”
Doc – “This is good! As expected!”
I wasn’t saying inflation is simple to predict, but if the banks have a 50% error rate when predicting one month ahead then that inspires little confidence in their longer-term inflation predictions.
Good poin Alexander.
I mean Is there such a thinmg as “BETTER” Inflation? good poisson, better sh@t?