The Monetary Policy Committee (MPC) of the Central Bank of Iceland voted 3–2 to raise the seven-day term deposit rate by 25 bp to 7.50 % on 18 March 2026, arguing that stubborn 5.2 % headline inflation, the highest underlying inflation in more than a year and a renewed rise in inflation expectations outweigh evidence of slowing economic activity. After cumulative 50 bp of cuts between February and November 2025 and an unchanged decision in February 2026, the increase partly reverses last year’s easing. Associated facility rates were lifted to 9.25 % on overnight loans, 8.25 % on seven-day collateralised loans and 7.25 % on current accounts, with the reserve requirement set at 3 % from 21 March. The Committee links the inflation flare-up to higher public levies, early-2026 wage settlements and a jump in oil and other commodity prices following the Persian Gulf conflict, warning that a wage-review clause could be triggered and intensify price pressures. It pledges further tightening if needed to steer inflation back to target, maintaining a data-dependent stance centred on developments in activity, prices and expectations.
Central Bank of Iceland 2026-03-18
Iceland MPC lifts seven-day term deposit rate 25 bp to 7.50 %
Central Bank of Iceland’s Monetary Policy Committee increased the seven-day term deposit rate by 25 bp to 7.50 % on 18 Mar 2026, partly undoing last year’s easing after headline inflation stuck at 5.2 % and expectations rose. Overnight loan, seven-day collateralised loan and current-account rates were lifted to 9.25 %, 8.25 % and 7.25 % respectively, and the MPC signalled readiness to tighten further if wage deals, levies and commodity-price pressures keep inflation above target.