Central Bank of Iceland Slashes Key Rate to 13% from 15.5%
May 7, 2009
The statement by Icelandic monetary authorities frames today’s 250-basis point rate cut as part of a shifting macroeconomic policy mix toward tighter fiscal policy and easier monetary policy. Prospects for krona appreciation in the medium-to-longer term, greater disinflation than expected previously, and an endogenous tightening of monetary conditions as commercial bank operations normalize also justify a “cautious but significant” decline in central bank rates. In three moves on March 19, April 8, and today, officials have reversed 500 basis points of a 600-bp rate hike last October 28th, mandated then as a key condition for Iceland receiving a loan from the IMF. The next monetary policy meeting is scheduled for June 4, and rates are likely to get lowered again at that time.
Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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