Icelandic 7-Day Lending Rate Cut By Another 100 Basis Points

December 11, 2009

The Central Bank of Iceland slashed its key benchmark rate by a further percentage point to 10% on Thursday.  Six cuts since March 19 have cumulated to 800 basis points from the peak of 18% observed after an IMF-mandated 600-bp rate hike in October 2008.  After cuts of 100 bp last March, 150 bp in April, 250 bp in May and 100 bp in June, officials paused their easing for the next five months.  Two additional cuts of 100 bps last month and this week were made possible because the krona has been stable without the support of intervention and by declining inflation.  Today’s statement from the central bank said a further gradual easing of policy will be implemented if those two conditions (exchange rate stability and falling inflation) continue.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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