Iceland Central Bank Hikes Key Rate By 50 Bps
November 17 2021 - 12:09AM
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Iceland's central bank lifted its key interest rate for the
fourth consecutive meeting as inflation outlook deteriorated amid
persistent global price pressures and a rapid rebound in domestic
economic activity.
The Monetary Policy Committee of the Central Bank of Iceland, on
Wednesday, decided to raise the key interest rates by 0.5
percentage points to 2.00 percent from 1.50 percent.
The bank had raised its key rate by 25 basis points each in May,
August and October.
The MPC reiterated that it will apply the tools at its disposal
to ensure that inflation eases back to the target within an
acceptable time frame.
According to the latest Monetary Bulletin, the economy is set to
grow 3.9 percent this year instead of 4 percent projected in
August.
GDP growth is seen at 5.1 percent next year and ease to around
2.5 percent from 2023 onwards.
Nonetheless, the bank cautioned that significant uncertainty
remains, and as before, economic developments will depend on the
path the pandemic takes.
The bank has raised its inflation outlook citing higher global
prices, domestic economic rebound and rising wage costs.
The bank said inflation appears set to measure 4.7 percent in
the fourth quarter of 2021, or 0.6 percentage points above the
August forecast. Inflation is not expected to fall below 4 percent
until next spring, and it will not fall below 3 percent until the
fourth quarter of 2022.
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