Iceland central bank lowers key rate to 8.0%

08:21, June 24, 2010      

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Iceland's central bank, the Sedlabanki, cut its key interest rate by a half percentage point to 8.0 percent Wednesday, according to news reports from Reykjavik.

The deposit rate, the maximum bid rate for 28-day certificates of deposit, the seven-day collateralized lending rate and the overnight lending rate will also be cut by a half percentage, the Sedlabanki said in a statement.

The Sedlabanki lowered the interest rates last time on May 5.

Since then, the krona has appreciated by five percent in trade- weighted terms and six percent against the euro and the inflation declined to 7.5 percent year-on-year in May, the Sedlabanki said.

The bank is also considering lifting capital controls further this year.

"Continued easing of monetary policy at this stage is justified by the appreciation of the krona and lower external risk premia, driven by better fundamentals and improved access to foreign liquidity through multilateral and bilateral agreements," the Sedlabanki said.

"These developments should facilitate the eventual removal of capital controls. The first steps towards complete liberalization of the capital account could be taken relatively soon after the Third Review of the IMF-supported program is completed," it added.

The Sedlabanki had raised its main interest rate to 18 percent in late 2008 when Iceland's financial system collapsed as a result of the global financial crisis.

Source:Xinhua

(Editor:黄蓓蓓)

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