The Central Bank of Iceland announced in a statement today that it would keep the bank’s interest rates unchanged.

The Central Bank of Iceland. Photo copyright Icelandic Photo Agency.

The overnight lending rate stands at 7 percent and the seven-day collateralized lending rate 6 percent.

Weaker growth than was forecast in February is expected but the suspension of the bank's program of regular foreign currency purchases and the support of the exchange rate of the króna with foreign exchange intervention has “proven effective,” the bank stated.

The bank's Monetary Policy Committee states that inflation, currently 4.8 percent, was considerably higher in February than previously anticipated but noted that the króna has appreciated since February.

The overall outlook is for continued gradual economic recovery. However, “if inflation declines more slowly than was previously forecast, it will be necessary to reduce the monetary slack sooner than would otherwise be required,” a statement says.

ZR