Central Bank of Iceland

February 7, 2018

The Monetary Policy Committee at Sedlabanki kept Iceland’s seven-day term deposit rate at 4.25%, its level since a 25-basis point cut in October 2017 that culminated four moves totaling 125 basis points of reduction since August 2016. Those declines fully reversed rate hikes previously during 2013. Officials released a rather hawkish statement that suggests that the next move is more likely to be up than downward in direction. The final paragraph reads,

The high real exchange rate has slowed export growth, and the outlook is for the positive output gap to narrow. Nevertheless, a tight monetary stance is needed to contain rapid domestic demand growth, in part because the outlook is for a less restrictive fiscal stance than previously expected. Furthermore, the outcome of wage settlements is still uncertain.

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



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