Iceland's Central Bank Continues Rate Cuts with a 50 Basis Point Reduction

Foreks - The Central Bank of Iceland (SI) continued to reduce interest rates, increasing the size of the cut to 50 basis points. According to a statement from SI, the benchmark one-week deposit interest rate was lowered from 9.0% to 8.50%. In its previous meeting, the bank had cut interest rates for the first time in four years by 25 basis points.

The statement from SI noted that inflation had recently decreased, measured at 5.1% in October, and said, "The decline in inflation has been broad-based, and headline inflation has also fallen. Furthermore, inflation expectations have generally decreased."

It was also mentioned that "the effects of a tight monetary stance can still be seen in economic activity, and the growth rate of domestic demand has slowed." The statement continued: "Unemployment continues to rise, and there is an indication that the demand pressures in the economy will ease more slowly than previously assumed. However, persistent inflation and inflation expectations above the target require caution. As a result, it remains essential to maintain a sufficiently tight monetary stance to bring inflation back to the target within an acceptable timeframe.

The formulation of monetary policy in the near term will, as before, be determined by developments in economic activity, inflation, and inflation expectations."