Bloomberg News

Iceland Inflation Slows for the First Time Since November

February 27, 2012

(Updates with comment in fourth paragraph.)

Feb. 24 (Bloomberg) -- Iceland’s annual inflation rate slowed for the first time since November, easing pressure on the central bank to raise interest rates.

Inflation slowed to 6.3 percent in February from 6.5 percent in the prior month, Reykjavik-based Statistics Iceland said today in a statement on its website. Consumer prices rose 1 percent on the month, the office said.

Iceland’s central bank signaled on Feb. 8 it was ready to raise interest rates in order to cap inflation. The bank this month left its benchmark rate unchanged at 4.75 percent for a second consecutive meeting, after last year raising borrowing costs for the first time since Iceland’s banks failed in 2008.

Sedlabanki, which targets annual price growth of 2.5 percent, this month raised its forecast for economic growth in 2012 to 2.5 percent from 2.3 percent previously.

“Inflation appears to have peaked for the present, and we expect it to continue falling in the near term,” Ingolfur Bender, head of research at Islandsbanki hf, said in a note to clients before the release. The bank estimates inflation will slow to 6 percent in March and “taper off steadily for the remainder of the year,” he said.

The central bank expects inflation to slow to 4.6 percent this year, 3.2 percent by the end of 2013 and 2.6 percent by the end of 2014, it said in a Feb. 8 statement.

--Editors: Jonas Bergman, Tasneem Brogger

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik

To contact the editor responsible for this story: Jonas Bergman at

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