16.05.2018 11:53:57

Iceland Central Bank Holds Key Rate As Expected

(RTTNews) - Iceland's central bank maintained its key interest rates as policymakers viewed that a tight monetary stance is still needed in order to contain rapid demand growth.

The Monetary Policy Committee of the Central Bank of Iceland decided, on Wednesday, to hold the seven-day term deposits rate at 4.25 percent. The bank had lowered the rate by a quarter point in October 2017.

Due to weaker export growth and less rapid rise in domestic demand, GDP growth is forecast to ease between 2017 and 2018.

The bank observed that inflation has remained broadly in line with the 2.5 percent target in recent months. The exchange rate of the krona has been broadly stable since the previous meeting.

Neither the inflation outlook nor inflation expectations have changed to any marked degree since the Committee's last meeting, the bank said.

Further, policymakers observed that although the short-term risk of unsustainable wage increases has receded, there are still underlying pressures in the labor market.