Icelandic annual inflation drops to 14%

Iceland inflation slows to 14%The Consumer Price Index (CPI) in Iceland rose by 0.86% between August and September, representing a drop in annual inflation from 14.5% to 14.0%, Statistics Iceland revealed yesterday.

Analysts had expected an increase of 14.2% in September, after a record rise of 14.5% in August. The drop was the first decline in the annual inflation rate since January 2008.

The price of clothing and shoes climbed more than 11%, causing a 0.5% rise in the CPI. The price of services also climbed considerably, or 1.1%, causing a 0.3% rise in the CPI. Thereof, the price of private sector services rose by 1.0% and the price of public sector services by 1.1%.

These figures were offset by a 0.8% decline in house prices, a 1.8% slump in the price of new cars and a 0.9% drop in petrol prices. The CPI excluding housing rose by 1.3%, bringing the annual rate to 14.7%.

Economists at Landsbanki said that Icelandic inflation peaked in August and will ease rapidly once the economy cools and the ISK has reversed its recent downward swing.