The Monetary Policy Committee (MPC) of the Central Bank of Iceland decided last week to keep the bank’s interest rates unchanged.
The Central Bank of Iceland. Copyright: Icelandic Photo Agency.
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.
The current interest rate decision is influenced by opposing factors. On the one hand, the inflation outlook has deteriorated, at least in the near term, inflation expectations have drifted upwards, and real Central Bank rates have fallen significantly.
Moreover, risks to the exchange rate outlook have increased in the aftermath of the Icesave referendum on April 9.
On the other hand, the outlook for growth and employment has deteriorated according to the Central Bank’s baseline forecast with additional risk to growth stemming from the result of the referendum.
Click here to read about the bank’s last interest rate decision.