FX.co ★ Iceland Inflation Rate at 11-Month High

In December 2025, Iceland experienced a notable increase in its inflation rate, which climbed to 4.5% year-on-year from the previous month's 3.7%. This level signifies the highest inflation reading since January, driven by rising costs in several sectors. Notable increases were seen in housing, water, electricity, gas, and other fuels, with a rise to 7.1% from 6.5% in November. Health sector prices increased as well, reaching 4.2% from 3.7%. Other sectors contributing to this inflation include communications (up to 1% from 0.7%), recreation and culture (rising to 2.8% from 2.3%), and the hospitality sector, encompassing hotels, cafés, and restaurants, which increased to 5.4% from 4.8%. Additionally, miscellaneous goods and services saw a price increase to 4.1% from 3.5%.

There was also a recovery in costs for clothing and footwear, which saw a modest increase of 0.8% following a decline of 2.3%, as well as furnishings and household equipment rising slightly by 0.3% compared to a previous reduction of 1.2%. Transport costs also turned positive, increasing by 2.3% from a slight decline of 0.1%. Price growth remained steady for alcoholic beverages and tobacco at 5.4% and educational services at 2.4%. Conversely, inflation slowed in the food and non-alcoholic beverages sector, which decreased to 5.5% from 6%. On a month-to-month basis, consumer prices climbed by 1.2% in December—the quickest rate observed in over a year—marking a rebound from a 0.5% decline recorded in the prior period.