Central Bank of Iceland Raised Reserve Requirement but Left Interest Rates Unchanged for Now

September 30, 2015

The reserve requirement ratio was doubled to 4% after the latest monetary policy meeting.  The seven-day collateralized lending rate stays at 6.25%, and the one-week term deposit rate is 5.5%, also unchanged.  Rates were increased earlier by 50 basis points in June (in a first hike since November 2012) and again in August.  Moreover, a released statement warns, “if inflation rises in the wake of the wage settlements, as forecasts indicate, the MPC will have to raise interest rates still further in order to bring inflation back to target over the medium term. How much and how quickly will depend on future developments and on how the current uncertainty plays out. A stronger króna and global price developments have provided the scope to raise interest rates somewhat more slowly than was previously considered necessary, but they do not change the need for a tighter monetary stance in the near future.” 

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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