Iceland’s Landsbankinn forecasts inflation rise to 5.9% in July, air travel costs to soar, clothing prices to drop

Landsbankinn, a major Icelandic bank, predicts that inflation will rise to 5.9 percent in July, marking a 0.1 percentage point increase from the previous month. The bank’s forecast also suggests that the cost of air travel will increase by 14.9 percent, while clothing and footwear prices are expected to decrease by 9.2 percent.

The bank’s analysis division anticipates that the consumer price index will increase by 0.15 percent in July, thereby pushing the annual inflation rate from 5.8 to 5.9 percent. The forecast explains that the month of July is typically characterized by summer sales leading to a drop in the index, while international airfare contributes to its increase. These two factors are the major causes of monthly price fluctuations in the bank’s forecast. Clothing and footwear prices are expected to decrease by 9.2 percent monthly, an unusual occurrence as these prices generally increase throughout the year, except in January and July when sales begin.

The bank’s forecast also predicts that air travel costs will rise by nearly 15 percent monthly. The analysis explains this as a clear seasonal fluctuation in international airfare, with the highest rates in July, followed by a decrease in the autumn, and then another increase before Christmas and Easter.

In the forecast, price changes in most other categories are expected to be within one percent. The third-largest price change is in the category of furniture and household goods, where prices are predicted to decrease by 1.3 percent monthly.

Looking ahead, the bank’s forecast predicts that inflation will remain relatively stable in August and September, before dropping to 5.4 percent in October.