The Central Bank of Iceland’s Monetary Policy Committee has kept the Bank’s interest rates unchanged, leaving the key policy rate, the seven-day term deposit rate, at 7.50%. The decision was unanimous. Inflation measured 4.1% in September, up 0.3 percentage points month on month, which the Committee attributed largely to anticipated unfavourable base effects. Recent quarters have seen a clear slowdown in economic activity and easing demand pressures, although wage rises remain sizeable and inflation expectations, while lower than recently, are still above the 2.5% target. The Committee said conditions for easing the real interest rate have not yet emerged and that further rate cuts will depend on inflation moving closer to target, with near-term decisions guided by developments in activity, inflation and inflation expectations. Operational rates remain 9.25% for overnight loans and 8.25% for seven-day collateralised loans.
Central Bank of Iceland 2025-10-08
Central Bank of Iceland keeps key interest rate at 7.50% and ties future cuts to inflation moving closer to target
The Central Bank of Iceland's Monetary Policy Committee has maintained the key policy rate at 7.50%, citing inflation at 4.1% in September and ongoing economic slowdown, with future rate cuts contingent on inflation aligning closer to the 2.5% target.