Iceland’s central bank kept its key rates unchanged for the third straight meeting on Wednesday but repeated that it will tighten monetary policy further.
The Monetary Policy Committee of the Central Bank of Iceland decided to leave the seven-day collateralized lending rate at 6.50 percent and the deposit rate at 5.75 percent.
Previously, the bank raised its rates by 25 basis points last November and by 50 basis points each in August and June 2015.
Global price developments and a stronger kr?na have provided the scope to raise interest rates more slowly than was previously considered necessary, the bank said in a statement.
Nonetheless, a tighter monetary stance will probably be needed in the coming term, in view of growing domestic inflationary pressures.
“How much and how quickly the monetary stance must be tightened will depend on future developments,” the bank said.
With inflationary pressures building and the economy growing strongly, more rate hikes are just around the corner, Jessica Hinds, a European economist at Capital Economics, said.
The economist expects the Sedlabanki to lift its policy rate by 50 basis point this year, starting with a quarter point hike at the next meeting in May.
The material has been provided by InstaForex Company – www.instaforex.com