Svartigaldur · Monetary policy · 8 November 2026

The Central Bank will probably hold its key rate at 8%

Most likely no change on 18 November. Price increases have slowed, but inflation is still 5.9% and expectations are too high for a cut.

The Central Bank of Iceland's Monetary Policy Committee announces its next rate decision on Wednesday 18 November. The key rate is 8%, and inflation measured 5.9% in October, the same as in September. To judge what the committee will do, we gave the same public data to 100 simulated participants, from committee members to bond traders and union economists, run on five different AI models. 88 of the 93 valid answers expected the rate to stay unchanged.

93 valid answers out of 100

What will the Monetary Policy Committee decide on 18 November? · number of seats

Seven answers were invalid: six exceeded the length limit for the reason and one call failed. The shares are votes by simulated participants, not probabilities.

See the counts

What will the Monetary Policy Committee decide on 18 November? · number of seats
Answer	Seats
Cut by 0.25 percentage points	2
Hold, signalling cuts ahead	11
Hold, tight or neutral tone	77
Hike by 0.25 percentage points	3

Produced with the help of AI. Sources, scope and method follow.

See what pulls each way

Why a hold

Expectations keep rates up

Since March, every statement from the committee has ended with the same rule: policy will be determined by economic activity, inflation and inflation expectations. In October it held rates unanimously and said inflation expectations were still too high even though activity had slowed.

Expectations have barely moved since. According to the October minutes, households expect inflation to average 5% over the next five years and business executives expect 3.5%. Five-year breakeven inflation in the bond market was about 3.7% in early November. All of these are well above the Bank's 2.5% target.

On the other hand, policy is already tight. The Bank's real rate, measured against the average of inflation measures and one-year expectations, was 3.4% at the October meeting. Most seats in the simulation gave this reasoning: too early to cut while inflation and expectations are this high, but no case for a hike now that momentum has slowed.

What pulls down

Momentum has slowed and the labour market is cooling

Underlying inflation, the average of the Central Bank's measures, was 4.4% in September, so headline inflation is running above the underlying trend. Iceland Signals' calculation from the consumer price index shows services prices rising at a 15% annualised pace over the three months to July, but barely moving over the three months to October.

Activity has weakened too. Statistics Iceland estimates that GDP contracted 1.1% year on year in the second quarter. In Gallup's September survey, executives planning to cut staff outnumbered those planning to hire by 18 percentage points. There are about six unemployed people for each vacancy. Nationwide, unsold housing stood at about 8.6 months of sales in August.

These were the arguments of the simulated committee members who weigh jobs and activity most. Two of the 25 committee-role seats voted for a 0.25 percentage point cut: one in the role of deputy governor for monetary policy and one in the role of the external member focused on employment.

What pulls up

Fuel, administered prices and wages

Diesel prices rose 11.2% and petrol 8.0% in October, adding 0.27 percentage points to the consumer price index in the month. Brent crude was close to 101 US dollars a barrel before the October meeting.

Prices set by the public sector rose 10.2% in the twelve months to October by Iceland Signals' calculation, against 6.8% for other prices. The wage index was up 5.7% year on year in August, and the committee considers pay rises still larger than is consistent with the inflation target in the long run.

Three of the five seats in the role of the external member focused on inflation voted for a 0.25 percentage point hike. In August the committee raised rates by 0.25 percentage points by four votes to one; the member who voted against wanted to keep rates unchanged.

Method

How we made the call

We used Plurality AI, Svartigaldur's tool for having many AI models assess the same question. Twenty roles were run on five models (Claude Sonnet 5.5, GPT-5, Gemini 2.5 Pro, Grok 4.7 and DeepSeek R1), 100 seats in total. Five roles mirror positions on the Monetary Policy Committee: the chair, the deputy governors for monetary policy and financial stability, and two external members, one focused on inflation and one on employment. The other fifteen forecast the decision, including a Central Bank staff forecaster, bank analysts, traders, a pension fund, a foreign investor, unions, employers and the tourism sector.

Every seat received the same data package: the committee's statement and minutes, Monetary Bulletin 2026/3, October's consumer price index and just over 40 indicators from Iceland Signals. Analysts' forecasts for this meeting were deliberately left out. Each seat picked one step on a ladder from a 1 percentage point cut to a 1 percentage point hike.

The shares are votes, not probabilities. Seats on the same model are not independent, the roles are simulated, and one run says nothing about how often the method is right. We will publish how the call fared after 18 November.

Conclusion

A hold is most likely, with a continued tight tone

The data point to a pause rather than a move. Inflation is not falling fast enough for the committee to cut while expectations sit at 3.5–5%, but a cooling labour market and slower price momentum reduce the need for another hike. Of the 88 seats expecting a hold, 77 expected the committee to keep a tight tone rather than signal cuts.

What could change the picture

01
Central Bank market expectations survey, 11 November
Market participants' expected rate path and inflation for Q4. In August they expected rates to stay at 8% through year-end and to be 6.25% in two years. Higher inflation expectations would strengthen the case for a hike.
02
The Bank's new forecast, 18 November
Monetary Bulletin 2026/4 is published the same morning as the decision. The committee decides with a new forecast in hand that our data cannot include.

Sources and method

Central Bank of Iceland: MPC statement, 7 October 2026; minutes of the 17–18 August and 5–6 October 2026 meetings; Monetary Bulletin 2026/3.
Statistics Iceland: Consumer price index in October 2026, 29 October.
Iceland Signals: indicators retrieved 8 November 2026, including breakeven inflation, services and goods prices, administered prices, oil prices and wages.
Plurality AI: run of 8 November 2026; 100 seats, 93 valid answers.

The real rate, underlying inflation and household and business expectations are as the Central Bank reports them in its minutes. Services prices and administered prices are Iceland Signals calculations from Statistics Iceland data.

Analysis, simulation and text were produced with the help of AI. The seats' answers are generated by models and are not statements by actual committee members, analysts or institutions.

The indicators come from Iceland Signals, Svartigaldur's data service. About Iceland Signals →