Friday, March 23, 2012

Central Bank of Iceland Hikes Rate 25bps to 5.00%

Iceland's Sedlabanki raised its seven-day collateral lending rate 25 basis points to 5.00% from 4.75%.  The Bank said: "The economic outlook is broadly in line with the Central Bank's February forecast. The króna is weaker than in February, however, and the short-term inflation outlook has deteriorated somewhat from the forecast prepared at that time. Further ahead, there is the risk that inflation will remain above the Bank's inflation target for a longer period than projected unless the króna appreciates in coming months. The extent to which closing the loopholes in the Foreign Exchange Act affects the exchange rate will emerge in the near future."

Iceland's central bank last increased the rate 25 basis points at its November monetary policy meeting, after increasing the lending rate by 25 basis points to 4.50% in August.  Iceland reported headline inflation of 6.5% in December, up from 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; the Bank's inflation target is 2.5%.  Iceland's currency, the krona (ISK), last traded around 126.5 against the US dollar.


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