The average 12-month inflation in Iceland measures 0.8 percent. It’s the first time since 1998 that inflation drops below 1 percent. In the past three months, Iceland has seen a deflation by 0.3 percent, according to the latest update from Statistics Iceland.
This is well below the Central Bank’s target inflation of 2.5 percent. The Central Bank must analyze the reasons for this development and file a report on the issue to the government, ruv.is reports. Inflation has dropped from 4.2 percent in December 2013.
The analysis department of Íslandsbanki believes the low inflation can primarily be explained by appreciation of the Icelandic króna and the decrease in world market price of fuel and other raw products. The outlook is for further decline of inflation, the bank concludes.