Iceland Central Bank Holds Rate At 9.25%

(RTTNews) - The Central Bank of Iceland retained its benchmark interest rate on Wednesday citing the rise in inflation and strong inflation expectations.

The Monetary Policy Committee of the central bank maintained the rate on seven-day term deposits at 9.25 percent, as widely expected.

The rate has been at the current level since August 2023. The central bank has raised its key rate by a cumulative 850 basis points since May 2021.

The committee observed that inflation has risen marginally since the last meeting and underlying inflation remains high. Moreover, inflation expectations are broadly unchanged and stayed above target.

In line with a tighter monetary stance, domestic demand eased last year. Nonetheless, some demand pressures remain in the domestic economy and they have subsided very little since the May meeting.

"It therefore appears that it will take some time to achieve an acceptable rate of disinflation," the bank said.

The MPC observed that the current stance is sufficient to bring inflation back to the target but persistent inflation and strong domestic demand call for caution.

The bank reiterated that as before, monetary policy formulation will be determined by developments in economic activity, inflation, and inflation expectations.