Iceland's central bank maintained its key interest rates, as widely expected, on Wednesday. The Monetary Policy Committee of the Central Bank of Iceland decided to hold the seven-day term deposits rate at 4.25 percent.
The bank had lowered the rate by a quarter point in October 2017. Due to slower growth in exports, the bank said the outlook is for GDP growth to be somewhat weaker in 2017 and 2018 than was forecast in November. The economy is forecast to expand 3.2 percent this year and 3 percent in 2019.
The bank said the outlook is for inflation to remain close to target over the forecast horizon, and on the whole, inflation expectations have been in line with the target for some time. The bank forecast inflation to rise to 2.6 percent in 2018, before slowing to 2.2 percent in 2019.
The central bank observed that a tight monetary stance is needed to contain rapid domestic demand growth, in part because the outlook is for a less restrictive fiscal stance than previously expected.
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