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Iceland Central Bank Hikes Key Rate Further


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Iceland’s central bank raised its key interest rate by a quarter-basis point at its November meeting, in order to bring down inflationary pressures.

The Monetary Policy Committee decided to raise the key interest rate, which is the rate on seven-day term deposits, by 25 basis points to 6.0 percent, the Central Bank of Iceland said in a statement.

The previous rate hike was a 25 basis points in October.

The latest raise was the tenth successive rate increase since May last year.

Recent official data showed that Iceland’s inflation picked up slightly to 9.4 percent. The underlying inflation has continued to rise.

The central bank observed that the inflation target has become less firmly anchored, so it may take longer to get inflation back on track than usual and to strengthen the depreciated krona.

The central bank raised its growth forecasts due to the prospect of more rapid growth of domestic demand than was previously assumed.

The bank now sees economic growth of 5.6 percent this year and assessed that the outlook for 2023 has improved. Growth for next year is now projected at 2.8 percent, up from the August forecast of 1.9 percent.

The MPC will continue to ensure that the monetary stance is tight enough to bring inflation back to target within an acceptable time frame, the bank said.

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