Arion Bank sees Iceland inflation averaging 4.2% next year in latest economic outlook
TLT•Arion Bank cut its Iceland growth outlook and sees inflation averaging 4.2% next year, with the policy rate at 7% by year-end and rate cuts delayed until midyear.
1. Outlook for Iceland
Arion Bank cut its growth outlook, citing persistent inflation pressures, higher interest rates and weaker sentiment tied to the Middle East conflict. It forecasts inflation averaging 4.2% next year and the policy rate at 7% by year-end, with rate cuts delayed until midyear as progress on disinflation slows.
2. Spending and housing
The bank expects high borrowing costs and rising unemployment to restrain private consumption through winter and into next year. Residential investment is projected to contract this year and fall further next year, while real house prices are seen declining until mid-2028.
