Weekly bulletin 30 September 2024
Inflation was slightly lower than expected in September, down from 6.0% to 5.4%. We nevertheless expect that the Monetary Policy Committee (MPC) will wish to proceed with caution when it meets early this week and that it will keep the policy rate unchanged on Wednesday.
30 September 2024
The week ahead
- Tomorrow, Eurostat publishes inflation figures for the eurozone.
- On Wednesday, the Central Bank of Iceland (CBI) announces its interest rate decision. We expect the MPC to tread carefully and maintain an unchanged policy rate.
- On Friday, unemployment figures will be published for the US.
Image of the week
According to the count of residential housing under construction by the Housing and Construction Authority (HMS), numbers are down by around 17% compared to the same time last year. The greatest reduction between counts is in housing in the earliest construction stages, that is in non-weathertight apartments. In addition, housing that remains in the same construction stage between counts is down. HMS considers this an indication that contractors are now emphasising finalising projects rather than initiating new ones. In total, HMS expects that around 2,300 apartments will be completed by 2026, a quarter less that what HMS expects to be completed this year. There has been a significant influx in new housing for sale recently. A recent monthly report from HMS states that 43% of all residential housing for sale in the capital area is newly constructed - this ratio has not been as high since 2020. The report also states that new housing is as a rule slower to sell than older apartments. As the year progresses, fewer new apartments are sold within a month of being put on the market.
Highlights of the previous week
- Inflation was lower than expected the second month running in September, down from 6.0% to 5.4%. There were two main surprises this month. International air fares decreased rather more than we expected though air fares are generally down between months in September. We were aware that cancellation of school meal fees in elementary schools would impact the component hotels and restaurants yet underestimated the extent of the decrease. We have updated our 3-month inflation forecast and now expect inflation to measure 5.0% in October, 4.5% in November and 4.4% in December.
- The CBI published a statement from the Financial Stability Committee (FSC) and the latter Financial Stability Report of the year. The FSC considers the financial system in Iceland to be resilient. The FSC decided to hold the countercyclical capital buffer unchanged at 2.5% as risk in the financial system has not abated, and the FSN therefore considers it important that financial institutions maintain a strong equity position.
- Moody’s upgraded Landsvirkjun’s credit rating following its upgrade of the sovereign long-term issuer rating of the Government of Iceland
- In the stock market, Reitir signed an agreement providing for the purchase of real estate in Kársnes. Alvotech initiation a confirmatory patient study for a biosimilar candidate to Entyvio. Hagar and Festi announced their decision to initiate a formal sale process of shares in Olís and, for Festi, in Olíudreifing ehf.
- In the bond market, Ölgerðin sold bills and Orkuveita Reykjavíkur auctioned green bonds.
Statistics and market data
Weekly bulletin 30 September 2024 (PDF) (in Icelandic)
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