Iceland’s central bank maintains interest rates at 9.25 percent
Date
8/27/2024 4:28:09 AM
(MENAFN) Iceland’s central bank, Sedlabanki, maintained its interest rates at 9.25 percent during its latest meeting, marking the sixth consecutive session in which rates have remained unchanged. This decision comes despite Iceland having the highest borrowing costs in Western Europe. The key rate has been held at this 14-year high since August of the previous year, as the central bank continues to grapple with persistent inflation on the Atlantic island.
Governor Asgeir Jonsson noted in an interview following the announcement that while the overall trend towards cooling inflation is evident, progress is slower than anticipated. He did not rule out the possibility of a rate cut before the end of the year, but indicated that any such move would depend on future economic conditions. Following the decision, the Icelandic króna weakened against both the euro and the dollar, trading 0.4 percent lower against the euro at 152.70.
Iceland's approach contrasts with many other developed economies, which are either easing monetary policies post-pandemic or preparing to do so. For instance, central banks like the Federal Reserve are considering shifts in their monetary strategies. Jon Bjarki Bentsson, head of research at Islandsbanki hf, observed that the central bank's forward guidance suggests no further rate hikes are expected in the immediate future, but the chance of a rate cut before year-end has diminished.
The central bank also revised its economic forecasts, lowering growth projections through 2026 and raising its expectations for consumer price increases. Officials acknowledged that it will require additional time to bring inflation back to more acceptable levels, signaling ongoing challenges in managing economic stability amidst global and domestic pressures.
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