VR chair warns of sharp rise in domestic food prices

Halla Gunnarsdóttir, chair of VR, says she is concerned about steep increases in domestic food prices, even though inflation was unchanged month to month, mbl.is reported. Lamb and poultry prices each rose by 3 percent over the month, she said, adding that the effects of changes to agricultural products legislation should be examined.

Annual inflation was 5.9 percent, unchanged from the previous month, as bank analysts had forecast. Halla welcomed the pause in inflation and said underlying inflation was declining. Falling prices for imported goods also suggested that measures to stabilise prices had had some effect.

“But we are concerned about the trend in domestic food prices,” she said. Domestic food prices have risen substantially over a longer period, and the reasons should be investigated. Halla said changes to agricultural products legislation may have contributed, and that exemptions from competition oversight had clearly not been beneficial. VR, LÍV and Fagfélögin met on Thursday morning to review the figures.

Halla also noted that inflation excluding housing was now the same as inflation including housing, suggesting housing costs were no longer driving inflation to the same extent as before. However, rents were still rising and affected how owner-occupied housing was factored into the index. She said work on a proposed rent brake, announced by the minister for social affairs and housing, should be completed.

“It should help put some limits on this part of inflation,” she said.

Halla also raised concern about the effect of oil prices on households after the oil price cap, which had been intended to protect them from price fluctuations, was scrapped. She said the cap had shielded households over the summer from the impact of conflict in Iran, but that protection was now gone. Oil prices could feed into inflation, housing costs and the indexation spirals in Iceland, she said.

She called for the oil price cap to be reconsidered, saying the global oil price was now comparable to what it was when the measure was introduced. “There is no need to let the effects of something we have no control over hit every person’s household budget so hard,” she said.