The increase in rent affects inflation

The increase in rent affects inflation

The consumer price index (CPI) in May is 0.42% higher than in the previous month. The CPI, excluding housing costs, has increased by 0.23% since April this year. Over the last twelve months, the CPI index increased by 4.4%, and 4.0% excluding the cost of housing. This is a slight decrease in inflation, which amounted to 4.6% in April.

The calculated rent increase is around 1.5% (impact on the index: 0.25%).

The forecast of Íslandsbanki predicted that the consumer price index would increase by 0.4% between months and this forecast proved true. Housing prices are rising strongly in these months and a lot is happening in the housing market at the moment. Inflation turned out to be more durable than the bank had recently forecasted, but the inflation outlook is pretty good, according to the Íslandsbanki website.

Landsbankinn’s economics division forecasted a 0.33% increase in the index between months, which brought inflation down from 4.6% to 4.3%.

“There are several big increases or decreases in the forecast of changes between months. One of the most interesting things will be to observe how calculated rents will develop in the near future. According to the Statistical Office, real estate prices rose sharply in March and April, reflecting strong demand in the real estate market. Then this demand may again lead to, for example, very favorable interest rates in the mortgage market that have never been lower before. There is a lot of uncertainty about home prices in the coming months, but we forecast that this time around, prices will rise by 0.7%, close to the 12-month average except for March and April. We also expect the impact of last year’s interest rate cuts to diminish. This effect has diminished the impact of rising prices
real estate for calculated rents. “ – we read in the Landsbankinn forecast.

Source: Yle

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