The CPI based on prices in July 2009 is 345.1 points (May 1988=100), 0.17% higher than in the previous month. The CPI less housing cost is 323.9 points, 0.56% higher than in June. The increase is lower than prediced by the IMF and Islandsbanki, but slightly higher than Landsbanki predicted.
Summer sales are widely underway, reducing prices of clothing and footwear by 7.3% (effect on the index -0.43%). Cost for owner occupied housing decreased by 2.6% (-0.35%), thereof the effect of lower market prices was -0.32% and of lower real interest rates -0.03%.
Prices of petrol and diesel oil rose by 4.8% (0.23%). Thereof the effect of increase in specific tax on petrol was 0.28%. Prices of furniture and furnishings increased by 4.7% (0.16%) and of new cars by 3.4% (0.12%).
The CPI in July 2009 is 11.3% higher than in July 2008 while the CPI less housing cost is 16.4% higher than one year ago. Over the last three months, the CPI has increased by 2.7%, equivalent to an annual inflation rate of 11.3% (16.7% for the CPI less housing cost).
The CPI compiled in the middle of July 2009, 345.1 points, is applicable for indexation purposes in September 2009. The old credit terms index for September 2009 is 6,814 points.
(Statistics Iceland press release, available at www.statice.is)
I WOULD NOT cut policy rate tomorrow, August 13th.
I would cut policy rate in September, 11% – 11,5%.
My forecast, inflation:
August: 9,7 – 10,1 ; policy rate 12%
September: 9,3 – 9,6 ; policy rate 11% – 11,5%
October: 7,6 – 7,9 ; policy rate 10% – 10,5%
Króna ( 178 – 183 against Euro, ICB rate )
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And, of course, I am not a financial wizard!!!
Sorry, I do mean: I WOULD NOT cut policy rate today, August 13th.