The Board of Governors of the Central Bank of Iceland has decided to lowerthe yield in the Bank's repurchase transactions with credit institutions by 0.3percentage points effective at the next auction of repurchase contracts on May7, 2002. Other Central Bank interest rates will be lowered by 0.3 percentagepoints effective May 1, 2002.

On Tuesday May 7, 2002 the Central Bank of Iceland will issue its quarterlyMonetary Bulletin. It will inter alia include a new inflation forecast for thenext two years and a detailed analysis of the current economic and monetarysituation and prospects. The inflation forecast and the analysis have largelybeen completed. The outlook is now for the inflation target being achievedbefore the end of 2003, as intended in the joint declaration of the Governmentand Central Bank of Iceland of March 27, 2001, and that the inflation rate willfall below the target in the first quarter of 2004 given an unchanged monetarypolicy stance. In addition, latest economic indicators point to an intensifyingcontraction of demand in the goods and labour markets. A detailed description ofthe rationale behind today's decision will be included in the MonetaryBulletin.

Nr. 5/2002

April 30, 2002