The Board of Governors of the Central Bank of Iceland has decided to raise the policy interest rate of the Bank by 0.25 percentage points from the next auction of repurchase contracts on June 8. The reasons for this interest rate increase are to be found in the Bank's analyses and new inflation forecast in the June issue of Monetary Bulletin, which was published on its website this afternoon. The concluding paragraph of the introductory article of the Bulletin states that the current outlook could warrant an even larger rise in interest rates on this occasion. The Bank would therefore raise its policy rates again shortly if new data fail to give strong indications of an improvement in inflation prospects.

For further information, contact Birgir Ísleifur Gunnarsson, Chairman of the Board of Governors of the Central Bank of Iceland, tel. (+354) 569-9600.

14/2004

June 1, 2004