Iceland’s Central Bank announced yesterday that the policy rate would be raised by 1.25 percent. It is now set at 15 percent and has never been higher. The purpose of the move was to strengthen the ISK, which appreciated by 3.5 percent as a result.
The move also had a positive influence on the Icelandic stock market, with the selected share index rising by 6.16 percent, which is the highest single increase in one day in the history of the stock market, Morgunbladid reports.
“This is the highest single increase which the bank has decided to make since the current policy on monetary control was adopted in 2001, which indicates the seriousness behind the decision,” said chairman of the board of the Central Bank’s directors Davíd Oddsson.
The move is a reaction to a drop in the ISK before Easter. When the Central Bank last made a decision on the policy rate for Iceland in February, 2008, it announced that in case of a sharp depreciation of the ISK, the policy rate would be raised.
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