Central Bank of Iceland Retains 4.25% Key Interest Rate

June 13, 2018

Iceland’s 7-day term interest rate has been at 4.25% since a 25-basis point cut last October, which culminated a 4-step easing cycle that included 25-bp cuts in May and June of last year and an initial 50-bp downmove in August 2016. These reductions exactly reversed three previous rate hikes done in June, August and November of 2015. A statement today from the central bank’s monetary policy committee asserts that the monetary stance needs to stay tight and projects that total and core CPI inflation will be close to the 2.5% target. Faster growth of more than 6% in the first quarter of this year is not expected to persist quite so rapidly, but the the suppression of imported inflation from prior krona appreciation is seen fading. Measured inflation expectations are in line with the central bank’s target. Demand is expanding kind of rapidly,¬†and underlying pressures in the labor market mustn’t be allowed to intensify.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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