Central Bank of Iceland Keeps Main Interest Rate at 5.25%

October 5, 2016

The seven-day term deposit rate had been cut in August by 50 basis points to 5.25%, partly reversing 125 basis points of tightening between June and November of 2015. One development against cutting the rate again is the rise of consumer prices last month, but a statement released after the latest policy meeting attributes the uptick to a correction for a previous measurement error and notes that inflation expectations continue to be consistent with the central bank target. Inflation has been lower than target for over two years, and officials remain concerned about upward pressure on the krona, which has been mitigated partly with intervention. Iceland’s economy has been expanding robustly.

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

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