Iceland's Central Bank lowers interest rates by 0.75%

08:18, November 04, 2010      

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The Sedlabanki, Iceland's central bank, lowered its interest rates Wednesday by 0.75 percentage points, according to a statement reaching Stockholm from Reykjavik.

"The deposit rate (current account rate) will be 4 percent and the maximum bid rate for 28-day certificates of deposit will be 5.25 percent. The seven-day collateralized lending rate will be 5.5 percent and the overnight lending rate 7 percent," Sedlabanki said.

Inflation continued to subside in September and October, after a marked decline since March of this year, partly due to the appreciation of the krona of about 1 percent.

According to the forecast published in Monetary Bulletin on Wednesday, the economy will be somewhat weaker this year and next year than the central bank had forecast in August.

However, a recovery was still expected to begin in the second half of this year. Inflation had subsided faster than was forecast in August, and the outlook was for inflation to be at target by year-end, fall below 2 percent next year, and subsequently return to target, the statement said.

Meanwhile, the bank also announced its capital controls would continue until at least March next year.

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


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