The Monetary Policy Committee (MPC) of the Central Bank of Iceland announced its decision yesterday to keep the bank’s key interest rates unchanged at 4.25 percent.
The Central Bank of Iceland. Photo by Páll Stefánsson.
The deposit rate (current account rate) will remain 3.25 percent, the maximum bid rate for 28-day certificates of deposit (CDs) 4.0 percent, the seven-day collateralized lending rate 4.25 percent, and the overnight lending rate 5.25 percent, as stated on the bank’s website.
Headline inflation currently measures 1.9 percent. The near-term outlook is for slightly higher inflation than previously forecast in spite of some indications of weaker economic activity.
This is due primarily to substantial increases in international commodity and oil prices, which need not signal higher inflation over the medium term provided that long-term inflation expectations and wage formation remain unaffected.
Short-term inflation expectations have indeed picked up somewhat recently; however, inflation is still expected to be below target in coming months and to approach the target over the medium term.
Click here to read more about the bank’s decision and economic forecast.
