Food is a very large post in the index basket

Up & rarely down 

Inflation in Iceland for the last twelve months is now 9.3% and continues to decrease, it was the highest, at 9.9% in July, and had not been higher for 13 years. The analysis departments of the three biggest banks predict that inflation will decrease slowly and steadily until next year. What has primarily driven inflation forward in recent quarters is the large increase in housing prices, which weighs heavily on the index. Since Iceland became an independent country in 1944, inflation has been higher and more volatile than in any other western country. The highest annual inflation was in June 1983 when it reached 130%. The longest period of stability lasted 18 years from 1990 to 2008, when the crash of the banking systems occurred. Only once in the 78-year history of the republic has there been a deflation, but in 1959 there was a 4% deflation in Iceland. The worst period in terms of economic management and inflation is between the years 1970 and 1990, inflation fluctuated between 40 and 50 percent. The basis of the index is based on the expenditure studies of the National Statistics Office, and the basis is renewed once a year. The index base takes into account the consumption of people living in Iceland, but not the consumption of tourists visiting Iceland. What does inflation mean, 1000 Icelandic króna in June 1944 when we got independence has now become 107,820 króna, no more and no less, the króna has, in other words, deflated quite a lot.

Housing prices weigh the most heavily in the index. Here we are looking south from Öskjuhlíð, across to Kársnes in Kópavogur, and Garðabær and south Hafnarfjörður, Reykjanes in the background.

Cars and the costs associated with them are one of the biggest expenses of most households.


Electronics and clothes rose the most in the last index measurement of the National Statistics Office.

Reykjavík : 24/09/2022 : A7R IV, A7C – FE 1.4/24mm GM, FE 1.8/135 GM Photographs & text: Páll Stefánsson