Friday, November 4, 2011

Iceland Central Bank Lifts Rate 25bps to 4.75%

Iceland's Sedlabanki increased its seven-day collateral lending rate by 25 basis points to 4.75% from 4.50% previously.  The Bank said: "Recent data and the Central Bank forecast published today in the Monetary Bulletin confirm that Iceland's economic recovery continues, despite weakening global growth and increased uncertainty. Output is expected to grow slightly faster in 2011 and 2012 than was forecast in August, and inflation is projected to be somewhat lower in coming quarters as a result of a stronger kr√≥na and lower imported inflation."

Iceland's central bank left rates unchanged at its last meeting, after increasing the lending rate by 25 basis points to 4.50%.  Iceland reported headline inflation of 5.3% in October, compared to 5.7% in September, 5% in July, 4.2% in June, 3.4% in May, and 2.3% in March; inflation had previously been forecast to peak just above 3.0% around the middle of this year, meanwhile the Bank's inflation target is 2.5%.  Iceland's currency, the krona (ISK), last traded around 115 against the US dollar.

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