The Consumer price inflation in Iceland attained a value of 6.04 % in 2024
The indicator recorded a historical change (bps difference) of 160 bps between 2021 to 2024, and is expected to decline by...
GlobalData projects the figure to change by 140 bps between 2025 and 2029, reaching...
Inflation
Inflation is an upsurge in the level of prices of the goods and services in an economy, which leads to a decline in the purchasing power of the currency’s value. It is calculated as the rate of change in prices in a specific period. The consumer price index (CPI) is one of the most common indicators for measuring inflation in an economy.
Global Inflation
Global inflation is a measure of the average annual rate of growth increase in national prices across all countries. It can be calculated using various methods including simple average, weighted average, and median price change. Global Data forecasts that the world economy will grow at a slower pace of 3.5% in 2022 following a 5.9% growth in 2021. On the other hand, the global inflation rate is projected to rise to 6.5% in 2022 from 3.5% in the previous year due to supply chain disruption amid the Ukraine-Russia war.
Consumer Price Inflation in Iceland
Between 2018-2021, the consumer price inflation in Iceland was highest in the year 2021, reaching 4.4%, an increase of 57.1% over the previous year 2020. Between 2018 to 2021, Iceland’s consumer Inflation increased by 0.7%.
In terms of inflation, the central bank of Iceland has hiked the key policy rates as of May 2021. It became the first country in Western Europe to tighten monetary policy since the outbreak of the COVID-19 pandemic. To tame inflation, the central bank increased its policy rate by 50bps to 1.2% in May and August 2021. As of November 2021, the monetary policy committee decided to increase it further to 1.5% so the inflation remains above the central bank’s target of 2.5%.
The rate of inflation decreased to 2.8% in 2020, mainly driven by a decline in food prices and rent. According to Global Data analysis, inflationary pressure is expected to increase to 3.1% by the end of 2021 before averaging 2.98% over 2022–23.
Factors that Impact Inflation Rate
Some of the major factors affecting consumer prices are government policies, money supply, consumer spending, employment levels, high disposable income, and wage levels. Interest rates can also have a significant impact on spending on consumer goods.
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