Landsbankinn Economic Research forecasts 1.4% economic growth this year and 2.1% next year. The economy has cooled down following a robust period of growth in the years after the pandemic and we now anticipate a slow start.  

Household deposits have grown considerably alongside rising interest rates. This has resulted in greatly increased interest income for households, in fact in excess of interest expenses.

A majority of the market now consider the monetary policy stance too tight. This opinion has become much more pervasive than in April, in response to steadily growing restraint alongside receding inflation and unchanged interest rates.

Economic growth will be limited in coming years according to our newly published macroeconomic forecast up to and including 2026. We forecast 0.9% growth this year, 2.2% next year and 2.6% in 2026. We expect inflation to recede down to 5.5% by the fourth quarter of this year. A rate-cutting cycle will begin in October, so our forecast, and we expect the economy to pick up speed alongside falling interest rates.