Key Financial Indicators and Balance Sheet Analysis Q1 2023

5 CPI by expenditure groups Nominal wage index - YoY %-change 16% 14% 12% 10% 8% 6% 4% 2% 0% 2020 2021 2022 2023 Housing Imported goods Other -Inflation Inflation target Facing a familiar foe Inflation has proven to be much more persistent than expected and price increases are now widespread. Although the contribution of housing prices is still substantial, domestic goods and services have taken over as the main driving force behind inflation. Even though inflation is expected to subside in the coming months, inflationary pressures are still pronounced, particularly due to the new private sector wage agreements, which have been used as benchmarks for other agreements. Long-term inflation expectations are still rising on some measures and are well above the Central Bank's 2.5% inflation target. High inflation, fear over de-anchoring of inflation expectations, robust domestic demand and inflationary wage agreements compelled the Central Bank to raise rates by 150 bps in Q1. Further rate hikes are expected. 12% 10% 8% 6% 4% 2% 0% 7% 6% 5% 4% 3% 2% 1% Sources: Statistics Iceland, Central Bank of Iceland, BoE, ECB, Federal Reserve, Arion Research Long-term inflation expectations 8% 7% 6% 5% 4% 3% 2% 0% 1% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0% Market agents - 5 years ahead Households - 5 years ahead Market agents - 10 years ahead Businesses - 5 years ahead CBI's inflation target 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Key interest rates 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 -US Euro Area UK -Iceland

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