Wednesday, November 3, 2010

Iceland Central Bank Drops Rates 75bps

The Central Bank of Iceland dropped all of its key interest rates by 75 basis points. The new rates will be: deposit rate (current account rate) 4.0%, the maximum bid rate for 28-day certificates of deposit (CDs) 5.25%, the seven-day collateralised lending rate 5.5%, and the overnight lending rate 7.0%. The bank noted the drop in inflation as a driver of the decision:
The Monetary Policy Committee considers that, if the króna remains stable or appreciates and inflation subsides as forecast, the premises for some further monetary easing should be in place. However, the prospect of removing the capital controls creates uncertainty about short-term room for manoeuvre. The MPC stands ready to adjust the monetary stance as required to achieve its interim objective of exchange rate stability and ensure that inflation is close to target over the medium term.
The Central Bank of Iceland next meets on the 8th of December 2010.



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