Weekly bul­let­in 15 April 2024

The Monetary Policy Committee of the Central Bank of Iceland (CBI) meets in early May and, if the Committee’s assessment the inflation outlook aligns with ours, we consider it likely that it will hold back on interest rate cuts until after the summer months.

The week ahead

• On Tuesday, the CBI publishes payment mediation figures for March and the Housing and Construction Authority the housing price index.
• On Thursday, Ölgerðin publishes annual financial statements.
• On Friday, Sjóvá publishes interim financial statements.

Image of the week

We expect inflation to recede from 6.8% to 6.1% in April and to continue to measure 6.1% in May. We forecast more or less unchanged inflation in June and July, at 5.9%. The reduction we expect to see in April is from the so-called base effect. The base effect is the result of changes to the consumer price index in the past 12 months. The CPI rose sharply in April 2023, a month that disappears from inflation measurement in April of this year. In the following months, the base effect is less pronounced and persistent inflation is likely in the summer months.

Highlights of the previous week

• Around 173,300 international tourist travelled through Keflavík International Airport in March - a record for that month, according to figures the Icelandic Tourist Board published last week. The seismic and volcanic activity on the Reykjanes peninsula may have hampered tourist traffic slightly in December and January but there is no discernible effect in the following months. Icelanders made 36,000 trips overseas in March, 16,000 more than in March 2023, with Easter beginning in March this year as opposed to April in 2023. Overseas trips by Icelanders in the first three months of this year are 8.1% more numerous than in the same period of 2024.
• Registered unemployment measured 3.8% in March, according to the monthly report from the Directorate of Labour. Unemployment is down from 3.9% in February yet up by 0.3 percentage points compared with March 2023. Unemployment is down in most sectors, most notably in the travel sector.
• We published an inflation forecast for April and the next three months. We expect inflation to measure 6.1% in April and May and 5.9% in June and July.
• Arion Bank published the outcome of a covered bonds auction.
• Government Debt Management released the results of auctions of RIKB 26 1015 and RIKB 35 0917.
• Alma íbúðafélag published the results of a bond issuance on 9 April.
• Útgerðarfélag Reykjavíkur completed the issuance of a new bond class, UR 260415.

Statistics and market data

Weekly bulletin 15 April 2024 (PDF in Icelandic)