Bank of Iceland’s August Policy Review

August 23, 2017

The 7-day deposit rate, which had been cut by 50 basis point sin August 2016 and by 25 bps each in May and June of this year, was left at 4.5% after the latest meeting of the monetary policy committee. A released statement revealed that projected GDP growth in 2017 was revised marginally lower but remains robust due to buoyant personal consumption and tourism. Second quarter inflation ran a little less than forecast and at 1.8% in July was below the inflation target of 2.5%. Short-term inflation expectations are up a bit, but longer-term expectations remain firmly anchored. The krona, which recently slipped but remains 8% firmer than a year ago, will be an important influence on future policy. So will the monetary decisions of other central banks. “The Bank’s real rate has eased slightly since the last MPC meeting but, under current conditions, appears to be at a level ensuring inflation broadly at target. The monetary stance in the coming term will be determined by economic developments and actions taken in other policy spheres.”

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



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