The Central Bank of Iceland’s Monetary Policy Committee (MPC) lowered the Bank’s interest rates by 0.25 percentage points, taking the key policy rate on seven-day term deposits to 7.75%. The decision was unanimous. Inflation was 4.2% in February, the lowest in four years, with a broad-based decline and easing underlying inflation; the MPC expects continued disinflation in the coming months. Demand growth has slowed and capacity pressures have eased alongside a tight stance, and housing market activity has cooled, but high-frequency indicators may point to stronger household consumption, while wage costs have continued to rise steeply and inflation expectations remain above target. The MPC judged that inflation pressures persist, warranting a continued tight stance and caution, given significant global economic uncertainty; future decisions will be guided by developments in economic activity, inflation, and inflation expectations. Updated rates include 9.50% on overnight loans, 8.50% on seven-day collateralised loans, 7.75% on seven-day term deposits, and 7.50% on current accounts.
Central Bank of Iceland 2025-03-19
Central Bank of Iceland cuts key interest rate by 0.25 percentage points to 7.75%
The Central Bank of Iceland's Monetary Policy Committee unanimously reduced the key policy rate on seven-day term deposits to 7.75%, amid a broad-based decline in inflation to 4.2% in February. Despite easing capacity pressures and a cooling housing market, persistent inflation pressures and global economic uncertainty warrant a continued tight monetary stance.