Iceland's central bank raised its key interest rate sharply at its May meeting on Wednesday to contain the risk of a wage-price spiral in the face of strong demand pressures, and the policy board hinted that further rate hikes would bring inflation back to the target range and thereby ensure a better balanced economy.
The Monetary Policy Committee of the Central Bank of Iceland, chaired by Governor Asgeir Jonsson, decided to raise the benchmark interest rate, which is the rate on seven-day term deposits, by 125 basis points to 8.75 percent.
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