Central Bank of Iceland

March 16, 2016

The Monetary Policy Committee has retained a 6.5% 7-day collateralized lending interest rate.  Prior hikes were made of  50 basis points last June and August as well as 25 bps in November, which was the most recent change.  A statement released today by the committee commits policy to further tightening because of accelerating domestic inflationary pressure but notes that the upward path is likely to be slower than imagined before:

Global price developments and a stronger króna have provided the scope to raise interest rates more slowly than was previously considered necessary.

Icelandic GDP growth is expected to be “robust,” but “inflation looks set to remain below the target well into this year.”  That said, officials attach a wide degree of uncertainty to the baseline forecast.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission. 

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