Central Bank of Iceland Cuts Key Interest Rate Skip to content

Central Bank of Iceland Cuts Key Interest Rate

The Monetary Policy Committee (MPC) of the Central Bank of Iceland announced yesterday its decision to lower the bank’s interest rate by 0.75 percent. It has now dropped from seven to 6.25 percent.

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The Central Bank of Iceland. Copyright: Icelandic Photo Agency.

The deposit rate (current account rate) will be 4.75 percent, and the maximum bid rate for 28-day certificates of deposit (CDs) will be 6.0 percent. The seven-day collateralized lending rate will be 6.25 percent and the overnight lending rate 7.75 percent, as stated on the bank’s website.

Inflation continued to subside in August, after a marked decline since March. The CPI rose 4.5 percent year-over-year, or 3.8 percent excluding consumption tax effects. Weak economic activity and this year’s appreciation of the Icelandic króna continue to support disinflation, the bank argues.

The third review of the economic program of the Icelandic government and the International Monetary Fund is likely to be completed by the end of September.

Once completed, the prerequisites for the resumption of capital account liberalization will be in place regarding the foreign exchange reserves and macroeconomic stability, the bank stated.

Click here to read its report in full.

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