Iceland January Inflation Unchanged as Sales Counter Krona Slide

Iceland’s annual inflation rate was unchanged this month as seasonal sales prevented a continued slide in the krona from raising prices, reducing pressure on the central bank to boost interest rates.

Inflation held at an annual 4.2 percent in January, Reykjavik-based Statistics Iceland said today on its website. Consumer prices rose 0.3 percent in the month, the agency said.

The central bank last month kept its benchmark rate at 6 percent as policy makers try to support the krona while they scale back currency restrictions. The bank, which targets 2.5 percent inflation, forecasts that inflation will average 3.6 this year and slow to 2.7 percent in 2014.

Iceland imposed currency restrictions in 2008 following the failure of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf after the krona sank 80 percent against the euro offshore. Arion Bank hf, the state-created successor to Kaupthing, has estimated the controls are stopping as much as $8 billion in offshore krona assets from being sold.

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net.

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