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Central Bank Lowers Key Interest Rate

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Central Bank Lowers Key Interest Rate

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Photo: Geir Ólafsson.

The Monetary Policy Committee (MPC) of the Central Bank of Iceland announced its decision today to lower the bank’s interest rates by 0.25 percentage points. The bank’s key interest rate—the rate on seven-day term deposits—will therefore be 4.75 percent.

A statement from the bank explains that there is an outlook for strong GDP growth this year, as in 2016, with growth for both years exceeding the February forecast. The main reason for that is stronger-than-expected growth in tourism, while there is also the prospect of more fiscal easing in 2017 than was previously projected.

Demand pressures in the labor market and the general economy have, therefore, grown despite increased importation of labor and strong productivity growth. This is offset by the appreciation of the króna. The króna has played a key role in the economy’s adjustment to positive shocks deriving from improved terms of trade and growth in the tourism sector.

Here is a list of the Central Bank of Iceland’s interest rates and reserve requirements.

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