Verðstöðugleiki

Verðstöðugleiki is an Icelandic term that translates to price stability. It refers to a situation where the general level of prices for goods and services in an economy remains relatively constant over a period of time, or increases at a very low and predictable rate. This is often a primary goal of monetary policy for central banks, as it is seen as essential for sustainable economic growth and well-being.

When prices are stable, it becomes easier for individuals and businesses to plan for the future. Consumers can make purchasing decisions with confidence, knowing that the value of their money is unlikely to erode quickly. Businesses can invest and expand, as they have a clearer understanding of future costs and revenues. Furthermore, price stability helps to preserve the purchasing power of savings and income, preventing sudden and significant decreases in living standards.

The opposite of price stability is inflation, where prices rise rapidly and unpredictably, and deflation, where prices fall. Both inflation and deflation can have detrimental effects on an economy. High inflation erodes the value of money and can lead to economic uncertainty, while deflation can discourage spending and investment, potentially leading to a recession. Therefore, maintaining verðstöðugleiki is a key objective for economic policymakers.