07 December 2011

Statement of the Monetary Policy Committee 7 December 2011

The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to keep the Bank’s interest rates unchanged.

Recent data are broadly in line with the Central Bank forecast published in the November Monetary Bulletin. Iceland’s economic recovery continues despite weakening global growth and increased uncertainty. Inflation is still above the Bank’s inflation target but recent developments are consistent with its returning to the target over the medium term.

The nominal policy rate path required to bring inflation back to target is highly uncertain. In the near term, the current level seems broadly appropriate in light of the economic outlook and potential international headwinds. Looking further ahead, however, it will be necessary to withdraw the current degree of monetary accommodation as the recovery progresses and the slack in the economy disappears. The degree to which such normalisation takes place through higher nominal rates will depend on future inflation developments.

The rates will be as follows:

Overnight lending rate 5.75%
Seven-day collateralised lending rate 4.75%
Maximum rate on 28-day certificates of deposit (CDs) 4.5%
Current account 3.75%


Nr. 30/2011
7 December 2011

Central Bank of Iceland interest rates