The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to keep the Bank’s interest rates unchanged. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore remain 7.50%. All Committee members voted in favour of the decision.
Inflation measured 4.1% in September, after rising by 0.3 percentage points from the previous month. The increase, which was anticipated, is due largely to unfavourable base effects.
Recent quarters have seen a clear slowing of economic activity, and demand pressures have eased in tandem with the tight monetary stance. The economy remains fairly resilient, however; wage rises are sizeable, and while inflation expectations have subsided in the recent past, they are still above target.
Many factors have moved in the right direction, but the conditions that would enable an easing of the real interest rate have therefore not yet emerged. Further interest rate cuts will depend on whether inflation moves closer to the Bank’s 2½% target.
As before, near-term monetary policy formulation will be determined by developments in economic activity, inflation, and inflation expectations.
No. 14/2025
8 October 2025
The interest rates will be as follows:
- Overnight loans 9.25%
- Seven-day collateralised loans 8.25%
- Seven-day term deposits 7.50%
- Current accounts 7.25%