• Arion Bank cut its Iceland growth outlook on persistent inflation pressures, higher interest rates, weaker sentiment tied to the Middle East conflict.
• Inflation forecast to average 4.2% next year, easing on base effects despite domestic pressures, war-driven energy spillovers, public levies.
• Policy rate seen at 7% by end-next year; rate cuts delayed until mid-year as disinflation progress slows.
• High borrowing costs, rising unemployment expected to restrain private consumption through winter into next year.
• Residential investment projected to contract this year, then fall more next year; real house prices seen declining until mid-2028.

Disclaimer: This news brief was created by Public Technologies (PUBT) using generative artificial intelligence. While PUBT strives to provide accurate and timely information, this AI-generated content is for informational purposes only and should not be interpreted as financial, investment, or legal advice. Arion banki hf. published the original content used to generate this news brief on September 30, 2026, and is solely responsible for the information contained therein.