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Monthly News­let­ter Au­gust 2025

Monthly newsletter of current economic affairs in Iceland.
1 August 2025

Inflation developed in line with expectations in July and measured 4.0%. International airfares rose more than we anticipated, while imputed rent increased less and summer sales on clothing and footwear were weaker. We believe the outlook is for inflation to remain around or above 4% throughout the year and forecast inflation at 4.0% in August, 4.2% in September and 4.3% in October.

The Central Bank announces its interest rate decision on 20 August. If the Monetary Policy Committee holds a similar view on the inflation outlook as we do, it seems unlikely that interest rates will be lowered. There still appears to be considerable consumer momentum in the economy; domestic payment card turnover continued to increase in real terms last month and the number of trips abroad by Icelanders rises steadily. There were nearly 7,000 more trips in June this year compared to June last year. Additionally, the exchange rate of the króna has strengthened significantly recently and unemployment has remained moderate, although tension in the labour market has eased gradually. It is likely that the Monetary Policy Committee now considers it more urgent than before to cool down the economy in order to bring inflation down to target.

Housing prices have been relatively stable lately, with annual housing price inflation at 4.7% in June. The annual increase is currently not far above inflation and real prices are only slightly higher than the same time last year.

The US and the EU announced a major trade agreement at the end of July. The US will limit import tariffs on most European goods to 15% and the EU commits, among other things, to purchasing energy and weapons from the US and pledges to significantly increase European investment in the US.

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Monthly Newsletter - 1 August 2025 (PDF)

Disclaimer
This review and/or summary is marketing material intended for information purposes and not for business purposes. This marketing material does not contain investment advice or independent investment analysis. The legal provisions that apply to financial advice and financial analysis do not apply to this content, including the ban on transactions prior to publication.

Information about the prices of domestic shares, bonds and/or indices is source from Nasdaq Iceland - the Stock Exchange. Landsbankinn’s website contains further information under each individual equity, bond class or index. Information about the prices of non-domestic financial instruments, indices and/or funds are sourced from parties Landsbankinn considers reliable. Past returns are not an indication of future returns.

Information about the past returns of Landsbréf funds is based on information from Landsbréf. Detailed information about the historic performance of individual funds is available on Landsbankinn’s website, including on returns for the past 5 years. Information about the past performance of funds show nominal returns, unless otherwise stated. If results are based on foreign currencies, returns may increase or decrease as a result of currency fluctuations. Past returns are not necessarily an indication of future returns.

Securities transactions involve risk and readers are encouraged to familiarise themselves with the Risk Description for Trading in Financial Instruments and Landsbankinn’s Conflict of Interest Policy, available on Landsbankinn’s website.

Landsbankinn is licensed to operate as a commercial bank in accordance with Act No. 161/2002, on Financial Undertakings, and is subject to supervision by the Financial Supervisory Authority of the Central Bank of Iceland (https://www.cb.is/financial-supervision/)
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