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Iceland Central Bank Retains Interest Rates

12/12/2012 4:14 AM ET

Iceland's central bank on Wednesday decided to keep its benchmark interest rate unchanged after raising it by a quarter percent last month.

The Sedlabanki maintained the seven-day collateralised lending rate at 6 percent and the current account rate at 5 percent. The maximum rate on 28-day certificates of deposit was retained at 5.75 percent and the overnight lending rate at 7 percent.

The central bank said that the most recent indicators suggest that economic developments have been in line with its November forecast. At the same time, the exchange rate of the króna has remained broadly stable, and inflation has developed in line with the forecast.

Iceland's consumer price inflation accelerated to 4.5 percent in November from 4.2 percent in October. The economy recorded a 3.5 percent growth in the third quarter, after contracting 6.1 percent in the second quarter.

"The accommodative monetary stance has supported the economic recovery in the recent term. The rise in interest rates since August 2011 and the decline in inflation have withdrawn a considerable amount of that accommodation," the bank said.

"Whether the Bank's nominal interest rates remain unchanged in the near term will depend, among other things, on whether the outcome of the forthcoming wage settlement review at the beginning of next year is consistent with inflation declining to the target."

by RTT Staff Writer

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