Central Bank of Iceland

December 13, 2017

Iceland’s Monetary Policy Committee had implemented cuts of its seven-day term interest rate of 50 basis points in August 2016 and of 25 basis points each earlier this year in May, June and October. The collective decline of 125 basis points exactly reversed hikes during 2015, leaving the level at 4.25%. The statement released today after the final policy review of the year strikes an upbeat tone that does not suggest another reduction coming soon. Officials note that domestic demand-led growth since its last assessment in November has been stronger than assumed. Inflation has hovered between 1.5% and 2.0% for some time, with a most recent reading of 1.7%. The krona has been stable, and solid demand is likely to persist. On balance, officials foresee an eventual need for tighter monetary policy, all the more so if fiscal policy proves more stimulative than currently assumed. The committee will next meet in early February.

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



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