The Monetary Policy Committee of the Central Bank of Iceland lowered the Bank’s interest rates by 0.25 percentage points, taking the key interest rate on seven-day term deposits to 7.75%. The decision was unanimous. Inflation measured 4.2% in February, its lowest in four years, with broad-based disinflation and an outlook for further easing in coming months. Demand growth has subsided and capacity pressures have eased, and housing market activity has slowed, although high-frequency indicators could suggest stronger household consumption. The Committee highlighted that wage costs are still rising steeply and inflation expectations remain above target, arguing for a continued tight stance and caution amid significant global economic uncertainty. The interest rate corridor now stands at 9.50% for overnight loans, 8.50% for seven-day collateralised loans, 7.75% for seven-day term deposits, and 7.50% for current accounts; near-term policy will be guided by developments in economic activity, inflation, and inflation expectations.
Central Bank of Iceland 2025-03-19
Central Bank of Iceland cuts key interest rate by 25 basis points to 7.75%
The Central Bank of Iceland's Monetary Policy Committee unanimously reduced the key interest rate on seven-day term deposits by 0.25 percentage points to 7.75%, amid broad-based disinflation and easing capacity pressures, while maintaining caution due to rising wage costs and above-target inflation expectations. The interest rate corridor is now set at 9.50% for overnight loans, 8.50% for seven-day collateralised loans, 7.75% for seven-day term deposits, and 7.50% for current accounts.