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Iceland’s central bank lowers key interest rate

The bank’s key interest rate—the rate on seven-day term deposits—will therefore be 4.75 percent. A statement from the bank explains that there is an outlook for strong GDP growth this year, as in 2016, with growth for both years exceeding the February forecast. The main reason for that is stronger-than-expected growth in tourism, while there is also the prospect of more fiscal easing in 2017 than was previously projected. Demand pressures in the labour market and the general economy have, therefore, grown despite increased importation of labour and strong productivity growth. This is offset by the appreciation of the króna. The króna has played a key role in the economy’s adjustment to positive shocks deriving from improved terms of trade and growth in the tourism sector. (Iceland Review)

 

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