Central Bank of Iceland

March 15, 2017

The seven-day Icelandic deposit rate was left at 5.0%. Reductions of 50 basis points last August and 25 bps in December reversed two increases that had been engineered in August and November of 2015. A statement released today by the monetary policy committee called the stance “tight,” which it is juxtaposed against a 1.9% on-year CPI inflation rate as of February. “GDP growth has turned out stronger than previously forecast, but the exchange rate of the kr√≥na is higher.” Retaining high inflation-adjusted policy interest rates helps contain expected inflation and didn’t prevent real GDP from expanded by a greater-than-assumed 7.2% last year. The statement notes that it’s too early to assess the implications of the recent removal of remaining Icelandic capital controls that were imposed during the banking crisis of 2008.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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