Verðlagsstöðugleiki

Verðlagsstöðugleiki, or price stability, is the state in which the overall level of prices changes only gradually and remains low and predictable over time. In economic terms, it means that inflation is kept within a narrow range, allowing households and firms to plan for the future with less uncertainty. Price stability contributes to stable real incomes, orderly wage negotiations, and efficient investment decisions.

In Iceland, price stability is typically pursued by the central bank through an inflation-targeting framework or rules-based monetary policy. The central bank aims to keep inflation near a stated target and to communicate assessments of future price developments to influence inflation expectations. An independent and credible policy framework is considered essential to achieving Verðlagsstöðugleiki.

Policy tools used to maintain price stability include adjustments to the policy interest rate, liquidity provision or withdrawal, and other monetary operations. In some cases, macroprudential measures and exchange rate considerations may also play a role in short-run stabilization. Price stability is monitored using price indices such as the consumer price index and measures of core inflation, along with expectations, wage growth, and import price developments.

Maintaining Verðlagsstöðugleiki faces challenges from external shocks, such as volatile commodity prices or currency movements, as well as domestic factors like supply disruptions or fiscal dynamics. Credible and transparent communication, together with appropriate policy responses, helps preserve price stability while supporting sustainable growth and employment. See also inflation targeting and monetary policy.