Iceland inflation reaches two-year high as business leader urges action

Inflation in Iceland has risen to 5.6%, its highest level in two years, while the head of the Confederation of Icelandic Enterprise says the country cannot afford to abandon efforts to bring it down, mbl.is reports.

“We have seen inflation heading above the target for some time. In that respect, this is not entirely unexpected,” Bjarni Benediktsson, director general of the Confederation of Icelandic Enterprise, said.

He said the main disappointment was that the past year had not been used more effectively. Inflation stood at 3.8% a year ago, but various increases by public authorities had contributed to higher inflation in the meantime.

Twelve-month inflation rose slightly from 5.3% the previous month to 5.6%.

“There have certainly also been several external factors affecting inflation here, as elsewhere, such as wars. But the least we can do is ensure that domestic measures do not make the problem worse,” Benediktsson said.

He said the period of high inflation and interest rates had lasted far too long and was now showing up in rising unemployment and slower activity, including in the construction sector.

“We are now seeing how costly it can be to have high inflation over an extended period,” he said.

The Confederation of Icelandic Enterprise is calling for any response to the situation to increase the likelihood of lower inflation and, subsequently, lower interest rates.

“It would be reckless to take measures now that would not help reduce inflation. That is what the discussion must focus on now: what we can do, because we cannot afford to give up on the task,” Benediktsson said.