The inflation rate fell from 4.6 percent in July to 4.1 percent in August, according to Statistics Iceland.

The Central Bank of Iceland. Photo Copyright Icelandic Photo Agency.

The Central Bank of Iceland aims for a 2.5 percent inflation rate, but expects the price growth to be at 5.4 percent on average this year, 3.4 percent next year and 3 percent the year after, reported Bloomberg.com on Wednesday.

The reason for the slowing inflation is the strengthening króna, which was at a three-year high in mid-August.

Still, optimism in the financial sector is kept moderate, as the bank’s inflation target for this period is unlikely to be met and problems in the longer term can also be expected.

Bloomberg.com cites Ásdís Kristjánsdóttir, head of research at Arion Bank:  “The winter could turn out to be more challenging as the current króna exchange rate can’t be maintained, unless the Central Bank and the government can through craftiness prevent the króna from weakening.”

NZ