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Iceland Central Bank Raises Key Rate By 50 Bps To 5.5%

Iceland's central bank on Wednesday decided to raise its policy interest rate by fifty basis points, citing stable economic recovery that extends to most sectors.

The monetary policy committee increased the seven-day collateralized lending rate to 5.5 percent from 5 percent. The latest decision follows a quarter percent hike in March.

Announcing the decision, the bank said domestic demand continues to be strong, and the labor and housing markets show signs of clear recovery. According to the central bank, there is the risk that inflation will remain above its inflation target unless the króna appreciates in the coming months.

The inflation outlook has deteriorated owing mainly to weaker exchange rates, the bank said. Iceland's annual inflation remained stable at 6.4 percent in April. Consumer prices moved up 0.8 percent month-on-month.

by RTT Staff Writer

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