Inflation in Iceland Reaches New High Skip to content

Inflation in Iceland Reaches New High

Twelve month inflation currently measures 11.8 percent, according to Statistics Iceland, which is the highest inflation in Iceland in 18 years. Prime Minister Geir H. Haarde said these results are a great disappointment.

Haarde is however optimistic that the inflation will fade quickly, as he told Fréttabladid.

Inflation increased by 3.2 percent between March and April and has not been higher since September 1990.

Haarde does not believe the government could have undertaken anything to prevent this situation. “We have to analyze where these price increases are coming from. They are partly caused by price increases overseas which we cannot control and partly because of the depreciation of the ISK.”

According to Morgunbladid, the consumer price index increased by 3.4 percent in April and has not risen as much between months in 20 years.

That means that the monthly debt burden of an ISK 18 million (USD 246,000, EUR 157,000) mortgage taken one year ago has increased by more than ISK 6,000 (USD 82, EUR 52) in one month.

President of the Icelandic Confederation of Labor (ASÍ) Grétar Thorsteinsson said Iceland is in serious trouble if this situation cannot be improved.

“I think the deciding moment will come in the next days and weeks,” Thorsteinsson said, adding that the wage improvements agreed on in February are diminishing every day.

“Not even a miracle can secure the prerequisites of the wage contracts when they will be reviewed [at the beginning of next year],” Thorsteinsson said.

Managing director of the Confederation of Icelandic Employers (SA) Vilhjálmur Egilsson agrees, saying SA and ASÍ had not expected such a high inflation when the wage contracts were made.

Click here to read more about the wage contracts.

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