Landsbankinn forecasts 5.8% inflation in September

Landsbankinn’s analysis department forecasts that annual inflation will rise to 5.8% in September from 5.6%, mbl.is reports.

Fuel prices rose sharply at the turn of the month after a temporary reduction in value-added tax expired. The tax rate on fuel had been cut from 24% to 11%, and its expiry alone is expected to raise fuel prices by nearly 12%.

“Fuel prices rose sharply at the turn of the month when the temporary reduction in value-added tax expired. In contrast, airfares abroad are falling in line with seasonal patterns. Higher healthcare fees and screening charges will also affect the month,” the bank said in its latest economic outlook.

The bank expects international airfares to fall by 16.7% in September, making them the biggest downward influence on inflation during the month. Airfares usually decline considerably in August and September after the peak summer tourism season.

If the forecast is correct, flying abroad will be 25% more expensive this September than in September last year.

Statistics Iceland will publish its September inflation figures next Tuesday.