Concerns minimal over inflation as projections indicate delay in target achievement in Reykjavik
Concerns regarding inflation are minimal at present, according to an economics lecturer. The inflation target is not expected to be reached for another two years.
Katrín Ólafsdóttir, an economics associate professor at the University of Reykjavik, noted that the July inflation rate was primarily driven by an increase in airline ticket prices. Forecasts from both the Central Bank and the International Monetary Fund (IMF) predict that it will take two years to achieve the inflation target, suggesting no immediate alarm.
While inflation has decreased in recent months, it may occasionally rise in isolated instances, according to Katrín. “Unless there are perhaps two or three more months of raises, I see no reason for concern,” she stated.
Most significantly, the July inflation surge can be attributed to climbing flight ticket prices. Although both the Central Bank and the IMF foresee a decrease in inflation, this will occur gradually. Katrín remarked that public expectations about inflation rates are quite high and could hinder quicker progress toward the target.
In newly established collective agreements, there are stipulations allowing for negotiations if inflation is not below five percent by September 2025. Presently, both the Central Bank and IMF projections fall under this threshold.
Katrín remains hopeful for a steady decline in inflation, despite the existing high inflation expectations which could impede progress. “If nothing significant happens in the meantime, there is no reason for concern as it stands,” she concluded, indicating a cautious optimism about future inflation trends.