Although Iceland’s central bank left its main interest rates on hold on Wednesday, it adopted a much more hawkish tone, signalling that it was likely to start hiking rates as early as next month. Strong domestic demand and labour market tensions would put upward pressure on inflation and force the Sedlabanki to reverse course in 2015. Capital Economics said – “We continue to think that the Sedlabanki to raise rates at its next meeting in June and anticipate that further hikes will follow.”
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