Landsbankinn predicts decrease in inflation rates in Iceland for November

The economic analysts at Landsbankinn predict a decrease in inflation, forecasting that the consumer price index will drop by 0.13% month-on-month in November, leading to a reduction in the annual inflation rate from 5.1% to 4.5%. The anticipated decline is largely attributed to falling costs in international flight tickets and calculated rents, while housing prices excluding calculated rents are expected to rise.

Analysts suggest that other components will have minimal impact on this trend. For instance, they expect international airfare to decrease significantly by around 13.3% month-on-month, while gasoline and diesel prices are projected to decline by 1.2%. The adjustments in pricing are typically seasonal, making November a month when airfare generally drops.

A notable expectation is that rents will decline by approximately 0.1% because of the calculated rent adjustments based on market rates. However, other housing-related expenses, particularly residential electricity costs, are forecasted to increase by 0.8% amid a recent increase of 3.5% in electricity prices.

The report also highlights uncertainties surrounding promotional sales days in November, where shops in Iceland often offer special deals. It remains unclear how these promotions will affect the consumer price index and categories such as clothing, footwear, and household items. As these economic indicators evolve, there is an overall expectation of further moderation in inflation rates in the coming months, with the annual inflation expected to reach 3.5% by February next year.