Central bank of Iceland holds interest rates steady

The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to maintain the Bank’s key interest rate steady. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore remain steady at 9.25 per cent.

This decision comes despite a marginal rise in inflation since the MPC’s last meeting, following a period of easing earlier this year.

Underlying inflation remains high with widespread price increases, significantly influenced by the housing sector.

Inflation expectations have stayed above target and largely unchanged. Although domestic demand has eased over the past year due to a tighter monetary stance, some demand pressures persist and have shown little reduction since May.

“The MPC is of the view that the current monetary stance is sufficient to bring inflation back to target, but persistent inflation and strong domestic demand call for caution. As before, monetary policy formulation will be determined by developments in economic activity, inflation, and inflation expectations.” the MPC statement read.

Attribution: Central Bank of Iceland

Subediting: Y.Yasser